The March 11 Japanese earthquake and subsequent disasters has put a big crimp in the production of cars and trucks, creating shortages that are likely to stretch into next year.
But as always, there's a flip side to the coin: automakers and dealers are gaining new pricing power as supplies dwindle. Automakers have been moving quickly to slash incentives and dealers are less eager to wheel and deal on prices as they contemplate delays in delivery of new inventory.
J.D. Power and Associates estimates that even in March, dealers and automakers netted an extra $300 on every new vehicle than a year ago, thanks to lower incentives, Automotive Age reported, a trend that's likely to become more pronounced in the months ahead.
TrueCar.com, meanwhile, estimated the average new-car incentive at $2,432 in march, down $366 from last year. Prices, meanwhile, remained flat even as consumers switched to less expensive vehicles – meaning they were generally paying more for less even as actual dollar amounts held steady.
So how long is this all expected to last?
The more optimistic observers think that production may get back to normal by May. But other industry insiders say the quake's effects could hang around until next year – affecting not just Japanese cars but also American and European brands that rely on key Japanese parts.
Many of the high-tech parts in today's cars are produced in Japan and it's not a simple matter to move production somewhere.
One after-shock that's just beginning to be felt is the effect on Japanese cars that are made in America. Although most Japanese cars are assembled here, many of the parts come from Japan but it only takes the lack of a single critical component to shut down an assembly line.
There are still a few cargo ships en route on their three- to four-week voyage to the United States from Japan, but once they arrive and offload, there will be no more for months.
Most dealers have enough cars on hand to last through April but beyond that, it's anybody's guess.
Toyota cuts back
Toyota sales have been slumping but the automaker is trimming back some of its incentives and marketing programs. Why? The answer's fairly obvious: inventories are getting slim as Japan struggles to recover from the recent earthquake and related disasters.
Slightly less obvious is the effect of higher gas prices on U.S. auto sales. While you might think of Toyota as a "green" company that produces mostly fuel-sippers, the truth is that a large part of its sales involve SUVs and light trucks. Both categories are selling sluggishly as gas prices continue their climb towards $4 and beyond.
Last year at this time, Toyota was pulling out all the stops, with massive marketing and advertising campaigns, generous rebates and ultra-cheap financing deals, all part of its effort to recover from the massive recalls occasioned by reports of unintended acceleration.
But this year, Toyota has discontinued a 2.9 percent APR program on the Prius hybrid and has put its traditional spring promotions on hold. Some parts of the country may see regional promotions, however.
Toyota insists it's not in danger of running out of Priuses. It is said to have about 12,250 in its U.S. inventory, 43,000 worldwide. That's about a 55-day supply.