Japan Earthquake Likely to Cause Increase for Auto, Part Prices

The earthquake that rocked Japan was so massive that it actually moved the country closer to the United States and changed the Earth’s axis, according to Yahoo! News. In the aftermath of the destruction, the Japanese auto industry is struggling to regain traction while factories work to rebuild and get back up to speed. Specifically, the supply shortages being felt in the parts market is being felt worldwide; according to Popular Mechanics, experts are predicting that prices will soon reflect those shortages.

For those thinking about purchasing a car over the next six months or so, looking now may save money. As Toyota’s Japan plants run at about 30 percent capacity, the ripple effect across the worldwide auto market is soon to affect prices. Japan’s auto companies are feeling the brunt of the supply shortages, and, with fewer cars to sell, dealers are certain to raise prices on those vehicles. Other auto companies will likely follow suit.

Even though U.S. automakers are experiencing less of a supply-side disruption, as executives see their competitors raise prices out of necessity, they will take advantage of the opportunity to increase their own profits. Jim Hall, an auto industry analyst, told Popular Mechanics industry-wide prices could increase by as much as 2 percent. Sticker prices may not necessarily increase, but dealers and automakers will have less incentive to offer rebates or other offers when their competitors’ prices are already inflated.

As the parts market will experience the same supply shortages, the cost of repairs for many vehicles will likely be affected as well. Often times, multiple auto companies will use the same or similar parts. The supply chain has been disrupted by Japanese parts makers who are unable to operate at full capacity or at all. The same global, streamlined supply chain that has driven prices down and given consumers the latest technology at a reasonable cost has shown its vulnerability and the domino effect that can occur when a geographic sector is affected by a natural disaster.

As time goes on, the extent of the effect of these shortages will be exacerbated. Consumers considering the purchase of a new vehicle in the next six months may save cash by looking now instead of waiting until dealers and automakers begin raising prices and cutting incentive offers. Long term, the market will normalize and prices should not reflect the shortages resulting from the earthquake in Japan.

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