Toyota & Nissan SLASHING Production RIGHT NOW | Episode 1035

It's noon here in Ventner City, New Jersey, and our nation's capital, Washington, D.C.

And this is Car Edge Live for Thursday, March 19th with your host, me, Ray, hanging out

here in Ventner City and Zach, hanging out in D.C.

How are you today, handsome?

How's the weather in Washington?

It's fantastic.

Everything's good here in D.C.

Grateful to get to spend some time with you this afternoon, Pops, and everyone.

That tunes in.

Today is another episode of Car Edge Live.

Toyota and Nissan are slashing production literally right now.

We're going to talk about that in just a moment before we do.

I like that.

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I can speak.

Yeah.

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The big story this morning, dad, as with all things caredge life related, we are talking

supply and demand.

On the supply side of things, Chalker, a global war, the Iran war, is disrupting Japanese

automakers supply chains.

This is actually leading to Nissan and Toyota right now, to your point earlier, literally

stopping some levels of production.

Let's break down what's happening here.

We will also do this through the lens of recently, this week, we talked about new vehicle inventory

levels here in the United States.

When we look at this chart, we know Toyota inventories are the lowest of any mass market

brand in the United States.

Nissan's are significantly higher over here, but still, these are two brands that maybe

one of them is okay to be trimming production, the other, not so much.

Dad, let's start here.

What's going on?

Is this actually a big deal?

Well, it's a big deal if you're in the Middle East.

It's not quite as big a deal here in the United States, but the reason it's a big deal in

the Middle East is the war is creating, the war in Iran is creating situations for well

shipping and shipping parts and supplies that both Nissan and Toyota need.

Aluminum, a lot of the aluminum that they get for their vehicles is out of the Middle

East.

NAFTA.

Is it NAFTA?

No, not NAFTA.

Oh, I forget.

I mispronounced it, whatever it is, but there's another resource that they get out of.

Navigate, I think, is the North American free trade.

Yeah, yeah, yeah.

You're a good dad.

Yeah.

It was in the article, I mispronounced.

No, we're going to help my dad out here because it is confusing.

We're going to pull it up on the screen.

It's NAFTA.

What is it again?

NAFTA.

Yeah, NAFTA.

Yeah.

All right, continue.

Which is needed in production for some of the plastics in the vehicles.

And then it's difficult, thank you, and it's difficult to get the produced vehicles from

Japan to the Middle East.

Now, the Middle East for both Nissan and Toyota is their second largest market in the world.

So when they're talking about cutting production, they are talking about cutting production

for those parts of the world.

Now, this is something that we haven't thought of.

This could allow them to increase, at least on Toyota's behalf, to increase the production

for North America since they will be producing fewer vehicles for the Middle East.

That could benefit consumers in this country if that were to happen, if they decided to

keep the plants running at full speed.

Yeah, so these are vehicles that they're producing in their home country, their domestic country

of Japan that they are, to your point, dad, now may be going to reallocate their factories.

To be clear here, these manufacturers, Nissan and Toyota in particular, have already been

cutting production of vehicles in Japan.

Nissan was cutting monthly output in Japan, excuse me, by about 1200 vehicles, while Toyota

was reducing production by as many as 40,000 vehicles through the end of April.

So these manufacturers were already going down a path which is fascinating, because at least

for Toyota, Nissan, maybe it's a little less fascinating, Nissan, we know, is struggling

to sell whether it be here domestically in the United States or globally.

But why would Toyota be on a path to reducing vehicle production in Japan?

Obviously, maybe some of that has to do with manufacturing sites, so they don't want to

produce vehicles in Japan and then ship them to the United States because of the tariff situation

that could be impacting their decision making here.

But it is an interesting thought experiment that if these manufacturers end up needing to

produce fewer vehicles as a function of not getting their supplies, their factories are

going to be sitting idle even more than they had already anticipated.

Would they then reallocate that resource, the factories, to produce more vehicles for North

America? If you're Toyota, why wouldn't you? You need inventory here.

Exactly. This is strictly a guess. This is another one of Ray's crazy opinions.

But my guess is that those at Toyota will look at this as an opportunity to, even though they

like the idea of having on-time inventory, where they have the lowest day supply of inventory of

any major manufacturer of the United States. I think they could look at this, and I think they

will look at this and say, maybe instead of a 30-some day supply, we'd be just as well off.

It was a 45 or a 48-day supply. Let's reallocate some production capability for vehicles to ship

to the United States. That's what I think the direction is that they will go.

They would have an opportunity to keep the plants running at a higher level,

and they would have the opportunity to not necessarily significantly impact the number

of vehicles that they're sending to the United States, but enough so that they could garner

even more market share here and still have the lowest or one of the lowest day supplies of

vehicles. It reminds me of that old saying, when life gives you lemons, make lemonade.

I think this could be a situation where someone like Toyota looks at it and says,

okay, so we're not going to sell as many cars or ship as many cars to the Middle East as we

normally would have, but it's an opportunity for us to ship more cars to North America.

Now, you know who this impacts adversely, I would say is Nissan. Dad,

think about this for a moment. Nissan was the number two automaker in the Middle East last year.

They sold more than 500,000 vehicles in that area. Think about this for a second. Nissan already,

maybe a quarter of their vehicles here in the United States, get sold to fleet customers. The other

three-fourths actually get sold to customers, consumers. They shut down what was it? Seven

manufacturing plants globally. They've done massive, massive layoffs globally. Now, they're

losing the market where they were second largest. This could be even more damaging for Nissan as a

global entity. We talked about last year, is Nissan going to survive? When we, of course,

think that the brand Nissan will survive, but maybe under new ownership, different financial

structure, this is a huge, huge hit for Nissan. They don't need to be producing more vehicles.

They need to be selling more vehicles and they're losing the opportunity to sell in a market.

They were massive. Yes. The Middle East is a huge market for Nissan. The Nissan Patrol,

which is their version of the Toyota Land Cruiser, the Nissan Patrol is a very popular vehicle

in the Middle East. To lose the ability to sell as many cars in that region as you

had expected to. That can be troubling for a company that was struggling to begin with.

It's fascinating how much can change in a year. Here's what I mean by that. A year ago,

Nissan was in real serious trouble. They still are, but there were talks

between Nissan and Honda that they would merge. Honda took the position that they were the

superior company and that Nissan, if they merged, would become a subsidiary of Honda.

Nissan looked at it as a merger of equals. They said, if we're not going to be equals,

we're not going to merge. Everybody thought, oh my God, what's going to happen to Nissan now?

And they went down a path of closing manufacturing facilities, laying off 20,000 employees,

restructuring the company, figuring out ways to save billions upon billions of dollars.

And in 13 months, what has happened to Honda? It is 180 degrees from where we were a year ago.

Honda is reporting huge losses like they've never had before. They've pivoted from their

mistake of trying to go electric. And everybody thinks, well, they only had a couple electric

vehicles in the United States. Still cost them huge tons of money because they did this with

General Motors. They're still a huge write-off that they have to absorb. And so what Nissan

thought was, we're the superior company and Honda is the superior company and Nissan is the inferior

company. And so it's not a merger of equals. Well, now it's completely reversed in that maybe Nissan

is the superior company and Honda is the inferior company. So the world has changed 180 degrees

for what's going on in Japan's manufacturing sector in just the last 13 months. It's crazy.

It really is crazy. And again, to be clear, what that means for us here in the United States of

America, our focus, what happens to the car market here, Toyota's day supply, maybe it goes up if we

start to hear some news of them shipping more vehicles to the United States. So that's something

we're going to be keeping our ears to the ground. And if we hear, we see news reports, hey, Toyota

is actually increasing production and shipping vehicles to the United States because they can't

ship vehicles to the Middle East right now because the Strait of Hermuse is closed. Great.

That'll be a good news for shoppers here in the United States of America. And similarly for Nissan,

they already do have an oversupply of inventory for the most part, hearing the United States for

Nissan and Infiniti. But you know what, if they need to find a place to ship these vehicles,

they'll probably come in here. So those will be good news. Similarly for Honda, Honda's caught up

in this as well. But definitely the stability of the Japanese auto market, it feels very similar

to the instability of the European auto market with Volkswagen right now. Or quite frankly,

the instability of the auto market here domestically with General Motors, Ford,

the total write-offs, if I may just for a second, were over $70 billion in restructuring costs

from those EV bets that have not panned out. So it's a very fluid moment for the auto industry.

It is really turning in rather rapidly to a global concern for legacy automobile manufacture.

This is turning into a boon for Russia because many of the Japanese auto manufacturers that get

a lot of their aluminum out of the Middle East are turning to Russia to get aluminum

directly from Russia. And obviously with the Strait of Hormuz, what's going on there,

a lot of Russian oil is becoming more and more available. So this whole situation

is like inverse of what I think everybody thought just 10, 12, 13 months ago, where

Japan and China might struggle. Obviously we're seeing struggles here in the United States and

in Europe. And Russia could see some real growth because of this.

Yeah, but if I may, Dad, it's not like we're going to see an influx of Russian-made OEMs

in the United States. You're talking like at the highest level. I'm keeping it very focused on

the automaker level. So sure, maybe supply chain because the supply chain changes. There's going

to be some beneficiaries here. But domestically here for customers, I think it continues to build

the narrative, Dad, that the car market is a bit in turmoil. That is truly the state of the car

market in 2026. Prices are too high. Inventory is building up. The only brands that have a limited

base supply of inventory are some of those that we've talked about recently, Toyota, Lexus,

even Chevrolet. For example, it's not a really good job managing their inventory. But the whole

narrative here is that Toyota and Nissan are slashing production right now as a result of

what's going on with the war. And our hypothesis is, which should be clear, it's just a hypothesis.

We've got Igor here saying, Zach, no news yet for Toyota North America production increases.

For now, I talked to my regional rep about it today. Great. The hypothesis is that they would

rather invest in keeping those factories running and produce more vehicles for the United States

versus just having them sit there idly. We'll see. And if they do that, then it is even more

a benefit to consumers who are thinking about buying a car here in the US. It should help drive

prices down. Well, you would think. And then the other concern, at least in my mind, is how long

this continues. And what I mean by this, the war in Iran, how long that continues, the conflict

continues in Iran. At what point, how long do you have to go to where Americans start thinking,

well, I was thinking about a car, but I'm just not sure what the future is going to hold.

And so there's a bit more trepidation for people to make large purchases,

whether they're paying cash or financing them. And so I think maybe four weeks, six weeks,

eight weeks down the road, we start from the impact of this, where sales are starting to

bottom out more than what was expected for this year, because there'll be a fear for people to

make large purchases. So this is really going to have some major impacts, not just here in North

America, but obviously we're seeing it globally. Now, the one counterbalance to this, interest

rates actually went down, dad, so far, and March for both new and used vehicles. The average new

vehicle interest rate has dropped almost a point, that 88 basis point. So let's talk about this.

This could be maybe the lever that gets pulled to try and get people to purchase vehicles,

new and used, lower interest rates and lower monthly payments. We also know in conjunction

with this, we've seen approvals for auto loans increase significantly. So what's your take

on this, dad? This is another story that's really important in the context of what we were just

discussing. Well, this is one of those deals where when you like to do experiments live,

this would be a good experiment to do. And what I mean by that is we know that the average

selling price today is, let's call it 49.5 for new cars. And so we know that interest rates

in March have dropped 88 bits, basis points, so call it 1%. And so the average

new car interest rate today is 6.81%. And what I would like the experiment to be

is if we purchase a new car at the average transaction price of 49.5,

what was the payment when the interest rate was 7.81% and what is the payment today at 6.81%

and is that enough of a difference to bring people back into the market?

So a couple things. So we'll use that price. Loan term, dad, we know is closer to what,

like 72 months? Yes. So we'll do 72 months. And then let's do no down payment.

And we'll keep all the other stuff the same. Sure, we're in Utah, other fees, whatever.

All right. So we're at a monthly payment of $863.31. Yes.

And so you're in February at the average new car rate in February. And now we're going to jump

ahead to March with an average new car rate of 6.81%. So we're going to go from 863.31 to drum roll,

$24 a month. If somebody couldn't afford $863 a month and a car payment,

will they suddenly be able to afford $839 a month? My guess is they cannot. My guess is that it

still remains out of reach for most people. And so even though it's significant that interest rates

have dropped about a point on the new car side of things, the payment still remains well above

what people can afford. And when you factor in how much more expensive gas has gotten

over the last three weeks, we're up almost a dollar a gallon. How's that going to impact how

people think about an $839 a month loan payment? So I don't know that interest rates have dropped

enough that it's going to inspire a lot of people out there to say, yeah, I want to jump

into the market, especially now that gas prices are up and we've got a war going on in Iran.

I don't think any of this bodes well for the economy, honestly.

I agree with you. And IC Cars has done some research that shows that these vehicles will

turn our attention to used cars are sitting on dealer lots longer. So this is a really

interesting analysis from IC Cars. Used Teslas are selling fast as the rest of the car market

grinds to a halt. Look at this data that they have here. Dad, I'll scroll down

to this chart. Average days on market for one to five-year-old used cars by month.

The dark blue line is a solid line is showing you 2025 to 2026. Last year is in the dotted line.

And you can see here, dad, that these vehicles, one to five-year-old used cars are sitting on

dealer lots longer. So this is not only impacting the new car market, the same calculus as being

done on the used car market, where obviously interest rates are even higher. And I think it's

taking more and more people out of the used car market as well. This data from IC Cars,

I think, demonstrates that. And do you think the reason for that would be is because used car prices

for one to five-year-old used cars, which are the younger, better conditioned used cars,

has remained terribly high in comparison. And so I think that is the reason some of those cars

are sitting. And what would be interesting to see what like six to 10 or six to 12-year-old cars,

how quickly they're selling. And the problem for those folks is going to be the quality of

those cars based on what we see at auctions is some of the lowest quality vehicle used cars

and highest mileage vehicle used cars we've ever seen. I mean, one of the things many new car

dealers are doing today is there was a time when a new car dealer would look at a high mileage

vehicle, an older high mileage vehicle, and they wouldn't even think about running it through the

shop, reconditioning it and selling it as a used car at their used car facility. They would just

instantly detail it and take it to the auction. Well, today, more and more dealers are looking at

these high mileage older cars and going, we got to keep that. Yeah. Okay, because it's the only

affordable used car we're going to have for some people. And, you know, I would, we need to talk

the brand in at some point and find out if he's having difficulty finding cars right now, especially

spring selling season, because more new car dealers are hanging onto older, crappier used cars.

I don't have data on older vehicles, but I do have data on the slowest selling one to five-year-old

used cars. Look at this list. Dad, well, actually, I'll scroll down just a touch so we can start with

number 10. Land Rover Discovery sitting for 101 days, Genesis GV60 101 days, Nissan Z 108 days,

Volvo XC90 108 days, the Ford Escape Plug-in Hybrid 112 days, GMC Sierra EV 116 days, Lincoln

Nautilus Hybrid 118 days, Dodge Hornet. It's on all these lists, 123 days, BMW i5 153 days,

and the Volvo XC60 Hybrid 170 days. These are the used cars, Dad, that are not selling right now.

These are the ones that when you pair everything up, high interest rates, maybe low quality,

and then lack of consumer demand, these are the ones that are just sitting longer than any others

out there. Well, let me ask you a question. Looking at that list, do you see anything on there

you would ever consider? 90, yes, someday, maybe, if I was a family and had a family,

stuff like that, sure. Yeah, maybe if the GMC Sierra wasn't an EV, perhaps, but you look at that list

and you can understand why those cars are, in the case of the Volvo XC60, sitting more than

three times more, taking more than three times the number of days to sell. It is, you can look at it

and you can begin to understand it. And part of it that I don't understand is we know hybrid sales

or new cars are way up and you would think hybrid sales for pre-owned cars should be up,

but maybe it's whose hybrid that it is that determines whether or not it sells.

Now, I think you're onto something here, Dad, because look, these are the fastest selling

one-to-five-year-old used cars. You've got the Toyota Grand Highlander, sits on the lot for 15

days. Porsche Macan, 15 days. RAV4 hybrid, 15 days. Grand Highlander hybrid, 15 days. Porsche 911,

15 days. Lexus TX550H, that's a hybrid, 13.8 days. The 911 hybrid convertible,

13 and a half. The Kia K4, 13 days. LC500, 10 days. And the Chevy Bolt, 10 days. It's a

totally different list here, but some connections. Lots of hybrids, for example.

And whose hybrid it is. Yeah, you know, there's something to be said for a Toyota hybrid over,

say, a Volvo hybrid. You know, there's a history. There's a proven history with the Toyota hybrids.

And so, yeah, it depends on who the manufacturer is and it sure as hell depends on how much you're

asking for it to begin with. And we all know the Volvo is going to be a hell of a lot more.

And actually, it might not be a hell of a lot more than some of those Toyotas on the list,

but the Toyotas are going to be looked at in a completely different way than the Volvo.

Because, I don't know, Toyota has a better reputation than Volvo does at the moment.

Not that either one of them doesn't have their issues.

Yeah, for sure, for sure. Again, folks, this show is brought to you by caredge.com. Me,

my dad and our incredible team. For those of you that are unfamiliar, we provide a car buying

service. We take care of research, dealer outreach, and negotiation. We learn what matters. Do you

contact car dealers, compare the offers, and help you get the best deal without the stress. We've

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of our limited time. Offer a $200 discount on our car buying service or 20% off caredgepro back at

caredge.com. Let's call the show for today. Tomorrow's Friday. We are very close to the

weekend, y'all, which is very exciting. Oh, my gosh. Tomorrow is feisty Friday?

Sure. Tomorrow is feisty Friday. We hope you tune in tomorrow as well. We appreciate everyone

that spends 30 minutes of their day with us. Thanks for doing this as always.

Yes. Thank you, handsome. I hope the weather stays wonderful. I know you have a big run on

Saturday. What is it? The rock and roll half marathon.

There you have it. If I were you, I'd do it twice. Don't quit. Run it twice.

My marathon prep training plan has me running two hours and 48 minutes on Saturday. I'll run

a half marathon in 90 minutes, and then I'll probably do another hour and 15 on top of that

afterwards. That's going to be so rough, so bad. Wow. I need hobbies. Yes, you should have a hobby

like mine. It's called sitting on my ass. We're back here tomorrow. Love you, Dad. Love you too, handsome.

If you liked the show, please take a moment to rate, review, and subscribe. It really does help

the show to grow. Thank you for listening.

Toyota & Nissan SLASHING Production RIGHT NOW | Episode 1035

About this episode

Nissan

slashing production

Toyota

NAFTA

production cutbacks

factory reallocation

tariff situation

day supply of inventory

fleet customers

Nissan Patrol

Toyota Land

merger of equals

restructuring

pivot

production increase

Strait of Hormuz

Infiniti

Honda

Volkswagen

Ford

General Motors

supply chain

Lexus

Chevrolet

interest rates

auto loans

loan term

down payment

monthly payment

gas prices

Genesis GV60

Volvo XC90

plug-in hybrid

Lexus LC500

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