By on March 26, 2011

After the Mach 11 earthquake and tsunami shut down a large number of power plants in Japan, rolling blackouts were instated in large parts of the country. Lack of power emerges more and more as the biggest impediment to a quick recovery.of the Japanese automotive industry. Most of the industry has been shut down. Power will remain scarce for many months in Japan. Come summer and A/C time, the situation will be worse. Japanese automakers are now considering running their factories in rotation to help cut the industry’s electricity consumption, The Nikkei [sub] writes today. Japan’s automakers could prepare for a production loss of well over a million units for the year.

The blackouts, which usually last three hours per day, take a big hit on plant efficiency. Metal-casting, for instance, is heavily affected. Smelting ovens need to be cleared and emptied before the shutdown and need a lot of time to come back up once power is restored. A three hour blackout often results in a nine hour downtime.

Rather than having power outages every day, the manufacturers want to secure stable electricity supplies for their factories in exchange for cutting the overall power consumption by rotating production. Under the plan, whole factories would be shut down on certain days of the week. Automakers will meet at the office of the Japan Automobile Manufacturers Association (JAMA) to come up with a rotation schedule.

Now run the numbers. If a car company works only 5 days instead of 6 a week, that translates into a reduction of output of 17 percent.  If the plan will remain in effect for the whole year, Japan could lose 1.3 million cars by the end of the year. Extra shifts would be out of the question, because that would negate the whole idea of power savings.

The 1.3 million number may sound sensationalist, but it is conservative. “Lost production in the two weeks since an earthquake and tsunami struck northeast Japan tops a third of a million vehicles,” writes Reuters, “and it could be months, rather than weeks, before the country’s automakers get back on track.” If more than 330,000 vehicles remained unmade in just two weeks, it does not take huge math skills to estimate the damage caused by the loss of power alone.

According to an energy brief by The Institute of Energy Economics, Japan, “a power shortage is definitely anticipated for the summer cooling demand season as well as next winter.” The Tohoku and Tokyo power companies have lost approximately 15 percent of their capacity for “a longer duration.”

Likewise, approximately 14 percent of the Japanese refining capacity is lost and needs “to be repaired over a longer time,” says the energy brief. Large parts of petrochemical production are reported destroyed by earthquake and fire. “Recovery is considered to take time,” says the report.

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10 Comments on “Rotating Power Rationing Plan Of Japanese Automakers Could Mean A Loss Of 1.3 Million Units...”

  • avatar

    All eyes should be on Toyota. That new plant they built with such fanfare not too far away from the epicentre of the disaster could pay huge dividends. Putting factories in northern China or in Tiawan to offset losses in Japan quickly.

  • avatar

    This is yet another example of how fragile the current state of Japan is.
    1.3 million units is a lot of cars to lose because of lost electric power. You have the manpower, you have the materials, but you don’t have the factories to produce them because the power supplies went out, so you can’t produce anything.
    I wonder just how big the impact on the world economy will be with this. It may only register as a blip, but it could also seemingly cause skittishness among investors and then ultimately cause global investments to reduce, with a minor ripple effect throughout the economy.
    And those numbers don’t seem to reflect unit losses associated with individual parts coming out of Japanese factories. Ford can’t make several of its car marques with black/red paint now, Chevy can’t build its Colorado due to lack of parts from Isuzu, Chrysler’s GA platform mates share CVTs from Nissan’s JATCO, and while the latter haven’t been idled yet, it’s clear that any vehicle that uses Japanese parts in any of its key components could have production issues associated with them.

  • avatar

    It should be mentioned that most of the rolling blackouts are scheduled for the Tohoku and Kanto regions only.  Most of the majority of automotive plants are centered away from those regions and focused more on power supplied by TEPCO, Chuden, and Tohoku EPCO.  For instance, for Toyota, It would be a very different situation if this hit the Nagoya region.
    But the BIG issue is supply chain disruptions.
    Outside of the handful of major factories located in those regions, Japanese automakers will need to find supply outside of that region (or Japan).  After the quake, many Japanese companies have been seeking foreign sources of production.
    Fortunately, there is still time till summer to sort this out.  The more lasting impact is that Japanese makers may finally embrace greater supply chain from the emerging world.  Hyundai, has done this with greater efficacy than the Japanese.  Its a move that the Japanese automakers have had to make for a long time, but this could be the impetus that finally pushes them in this direction.

    • 0 avatar

      This is Japan. Its power grid and its industry are interconnected. If one company closes down voluntarily, all do.

    • 0 avatar

      Oddly enough its not.
      Japan doesn’t have a national power grid due to historical decisions made during the Bakumatsu and Meiji period.  Eastern Japan operates on 50Hz and western Japan operates on 60Hz:
      Which is the problem, power from western parts of Japan can’t supply power to the Kanto and Tohoku regions.  There are on 3 stations in Japan that can convert energy (a mere 3GWs)
      Factories outside the Kanto and Tohoku regions are unaffected by rolling blackouts.  The main factories for Toyota(Nagoya), Honda(Mie), Mazda (Hiroshima), etc are unaffected by rolling blackouts.
      Another supply chain problem is small parts supply, Japanese automakers in particular are very reliant on very small suppliers (the machi-koujo, the town factory).  Many of these factories may not even come back online in the disaster area.
      Either way, Google has a map of where rolling blackouts are scheduled:

  • avatar

    The Chinese ideogram for crisis has the symbols for both danger and opportunity.  The Japanese can use the lower output to upgrade the assembly quality of the cars they do produce and the efficiency of the factories.  We all talk about the lower quality and decontented cars coming from Japan on this blog, this would be a chance to sell upcontented cars at a higher price (after all, if you can only make so many per hour, why not make them upscale & pricier just like in the golden days of the import quotas of the 80s).  Thoughts?

  • avatar

    I wonder if the long-term effect will be a stablization of prices, reduction of incentives, and decrease in the overcapacity of car production if manufacturers worldwide will be affected? If so, that may be a “good” thing.

    Ironically though, Japan has to replace thousands of cars destroyed too, so demand will probably remain high.

  • avatar
    John Horner

    If Japan’s electricity shortage continues long term then they will likely adopt a prioritized allocation scheme instead of simple minded geographic rolling blackouts. The damage to Japan’s economy from shutting down export oriented factories is more serious that would be shutting off power to other users. Some kinds of facilities like retails stores and residences can deal more easily with on again off again power than can others. Probably the worse factory to suffer from any power outages is a semiconductor manufacturing plant. A great deal of high value in-process product can be completely destroyed by a power outage.
    Japan may need to go into a difficult crisis prioritization mode such as Japan and Europe lived through in the post WWII period.

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