Will Japan Disasters Make Hondas, Toyotas More Expensive?

Edmunds on how the quake will impact Japanese carmakers

March 21, 2011— -- When I heard the news that Toyota had decided to delay production of vehicles in its Japanese plants for another week -- and that Honda had already done so -- my immediate thought was that Japanese cars were going to go up in price.

After all, under the law of supply and demand, there was going to be less supply, so I thought prices would rise. I was already envisioning the story I would do for "GMA," visiting dealerships with lots of empty parking spaces and talking to disappointed customers who either couldn't get the car they wanted or were going to have to pay more for it. But, turns out my Chicken Little reaction was too hasty.

The experts at auto website Edmunds.com know vastly more than I do about how car sales actually work. For example, Edmunds points out that auto pricing has a lot to do with the incentives that manufacturers offer to dealers. Those incentives give dealers more wiggle room to sell a vehicle at a lower price and still make a profit on it.

"Current incentive programs are in place through the end of March," explained Edmunds Chief Economist Lacey Plache, "so it is unlikely that any price increases due to lowered incentives will show up before then." In fact, Edmunds analyzed whether Japanese auto prices went up in the days right after the quake and tsunami and found no change.

However, Edmunds sees the potential for price hikes and model shortages. "In the longer term, pricing for Japanese-built cars could be affected for many reasons," Plache said, "including increased production costs and the possibility that Japanese automakers may have a diminished ability to offer incentives due to costs of reconstruction in Japan."

Edmunds CEO Jeremy Anwyl cautioned that "Over the next weeks, and possibly months, it may be harder to find exactly the model with options you want."

So, what to do if you had your eye on a Honda, Toyota or other Japanese-made vehicle? "Our advice to consumers," Anwyl said, "is that if you had any notion about buying a vehicle in the next few months, there is no downside to buying now, though plenty of possible upside."

In other words, Anwyl thinks it could be a good idea to scurry over to a dealership before the end of March while the pre-disaster incentives are still in place. It's not that the thinks you'll get a bargain now, but rather that prices could go UP later.

One caution from the folks at Edmunds is that some dealers might try to take advantage of the triple tragedy in Japan, using it as an excuse to charge higher prices. To guard against that, the key is to shop at multiple dealerships, so you can compare. With gas prices high again, you may be looking for a fuel efficient vehicle, so you should know that all of the Japanese automakers make their hybrids in Japan. And Honda also makes its fuel-efficient Fit, and Toyota its fuel-efficient Yaris, there as well. Keep an eye on the news to see if those plants get back to business.

One final hidden ripple effect: Japanese companies produce parts for many non-Japanese vehicles, according to Edmunds. For example, the Chevy Volt contains a Japanese-made transmission and BMW uses Japanese semiconductors. Welcome to the global economy.