Nissan in limbo waiting for Japan-made parts

PUBLISHED : Wednesday, 30 March, 2011, 12:00am
UPDATED : Wednesday, 30 March, 2011, 12:00am

Nissan Motor is scaling back production at all of its Chinese car factories due to supply-chain disruptions caused by the March 11 earthquake and tsunami in Japan.

Nissan is cancelling all weekend and overtime shifts at its mainland car plants because component suppliers in Japan have yet to boost output back to normal levels, Nissan China spokeswoman Sharon Shen said yesterday. The move will ensure adequate supplies for the company's mainland factories to maintain production at adjusted levels until mid-April, Shen said.

Nissan is the fourth best-selling car brand on the mainland, the world's biggest vehicle market, according to J.D. Power and Associates. While most carmakers and component suppliers have reported disruptions to their domestic production in Japan, Nissan is the first carmaker to publicly acknowledge an impact on its China operations.

'Supply-chain disruption is the main concern [for the mainland] at this moment,' IHS Global Insight China economist Xianfang Ren said this week in a note. 'The slower the production in Japan recovers, the larger the impact will be in the future as inventories are being drawn down quickly to meet demand.'

Nissan produces passenger cars and commercial vehicles in partnership with Hong Kong-listed Dongfeng Motor Group. Production at Dongfeng's car factories ran at about 103 per cent of designated annual capacity in the first half of last year, largely by adding extra shifts.

Shares in Dongfeng dipped 1.3 per cent yesterday on the news, closing at a seven-month low of HK$12.06.

Dongfeng has a separate carmaking joint venture with Honda Motor. A spokesman for Honda China, which also partners with Guangzhou Automobile Group, said its mainland operations had yet to see any impact from the situation in Japan.

Japanese carmakers on the mainland generally source 70 to 95 per cent of their parts and components locally, but rely on imports mainly from Japan, for the remainder. Citigroup analyst Kohei Takahashi estimates the overseas plants of most Japanese carmakers generally have two weeks' worth of inventory either on hand or in transit (on ships).

'The impact of the earthquake in Japan will probably only stop production at some overseas plants,' he wrote last week in a research note. 'However, it remains unclear whether overall supply chains ... will be operating normally by April, when we estimate pre-earthquake inventories will be exhausted.'