Japanese carmakers in China face damaging supply crunch

Supply chain disruptions in the wake of last week's earthquake and tsunami in Japan may spell trouble for Japanese carmakers in China if the situation worsens or current factory closures are prolonged.

Shares in the mainland joint-venture partners of major Japanese car and truck manufacturers fell yesterday on fears that existing inventories of imported components from Japan could be run down in a matter of weeks.

Production at nearly all of Japan's car plants and their supplier factories has been suspended since the quake struck last Friday, and continuing uncertainties over when normal operations there will resume have raised concerns over potential forced stoppages at car factories in China, the world's biggest car market.

Japan is conserving electricity and struggling with rolling blackouts as its nuclear power crisis worsens and fears have grown that crippled reactors at the Fukushima power plant are teetering on the verge of meltdown. As of yesterday, 10 major Japanese car and truck makers continued to suspend production at more than 50 plants, according to Bloomberg figures.

So far, no Japanese firms are reporting disruptions to production at their mainland plants. Most source between 70 per cent and 95 per cent of the components that go into their Chinese-made cars locally, and inventories of the parts they do import may be sufficient to sustain normal production on the mainland for several weeks.

'Based on our latest assessment, the earthquake and tsunami in Japan won't impact Honda's China production before the end of this month,' Honda Motor (China) Investment said yesterday. 'Up to now, operations are proceeding in a normal and orderly fashion' at all Honda's joint-venture plants.