Business Today

Japan earthquake hits auto sector

Japanese majors like Honda and Toyota announced 50 and 70 per cent production cuts respectively, leading to rising fear among car owners and new buyers.

Nishi Rath   Mumbai     Last Updated: April 27, 2011  | 11:29 IST

"I wanted to take my Toyota Innova for servicing but now feel I should wait for some more time. It's good that my vehicle is at my house rather than at the service centre," said Narayan R., an ex-banker.

Many others, too, share Narayan's view.

The after-effects of the earthquake and tsunami that ravaged Japan on March 11 are being felt by the Indian automobile sector, particularly the Japanese car manufacturers in India.

After Japanese majors like Honda and Toyota announced 50 and 70 per cent production cuts respectively, due to delay in supply of critical components, including engines and transmission units from Japan, there has been a fear among the car owners and people who wanted to go in for new purchase. The reason: "How long will we have to wait?" Honda Siel Cars India Ltd announced a production cut of about 50 per cent from May 2011 at its Greater Noida plant. It comes close on the heels of production cuts by its parent Honda Motor at its plants in Japan, following a shortage of components, mostly produced in the quake-hit areas.

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"We are experiencing gaps in our supply chain due to the situation in Japan, resulting in production cuts. We are moving to single shift operations from May, 2011, while carefully monitoring the situation. We plan to get back to normal production as soon as supplies normalise," said Jnaneswar Sen, senior vice-president, marketing and sales, in a company statement.

The massive earthquake and tsunami that hit Japan's northeast has disrupted the supply of key auto parts. "The result is that the waiting period for cars will go up," said a dealer who wished to remain anonymous.

"Generally, the waiting periods for all Toyota models are anywhere between one to three months, but after the production cuts, it might increase by another month," the dealer added.

Toyota Etios has 70 per cent local content, while components like engines and transmission systems are imported.

Honda Jazz, City and Civic have localised parts of around 75 per cent, while it is only 28 per cent for the Accord. Thus, high-end cars are the worst hit.

Lack of supply of critical components is also affecting the service periods of the dealers.

Some are taking over a fortnight to three weeks to deliver the cars given for servicing.

However, the situation is not that bad, some feel.

"I don't see any reason to be scared. We have ample stuff with us and don't think the customers will be affected. As Honda has announced there is only production cut, that means it will affect manufacturing of new cars, there will be no after sales problem," said a leading Honda dealer in the city.

"The waiting period, as always, will be the time taken for documentation, registration and finance and none of the three is taken care of by us. So, from our end there is absolutely no problem," the dealer added.

Besides dealers, customers too, feel that "this too shall pass". "The announcements from automakers like Honda and Toyota may concern some, but personally I am not concerned as it is just a temporary phase. I think the companies will solve the problem soon. India is a leading market for both the auto majors," said Nishikant Mohanty, who owns a Honda City.

Honda said production would return to normal only by the end of the current year. Output would remain at 50 per cent of originally planned numbers till the end of June.

Earlier, Toyota Kirloskar Motor Pvt Ltd, the Indian arm of Toyota Motor Corp, also announced a production cut of 70 per cent due to the calamity in Japan.

The company announced production cuts at its two facilities in Bidadi, Karnataka, till June.

The auto major also said that production would suffer till the year-end.

Courtesy: Mail Today

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