Rapid Response 2026: Japan earthquake brings new wrinkle (Issue 7)

Mobility Global’s seventh Rapid Response of 2026 addresses the July 28, 2026, Kumamoto, Japan, earthquake and early indications on light vehicle production. The Iran conflict continues, though sales and production remain surprisingly resilient. Talks surrounding the United States-Canada-Mexico Agreement (USMCA) have not yet led to a resolution, though we continue to expect that ultimately a trilateral solution will be found. Finally, we take a look at what the latest expectations are for oil prices against the backdrop of continued military conflict, and impact on the July 2026 light vehicle sales forecast.

2026 Kumamoto Earthquake

On July 28, a deadly 7.1-magnitude earthquake hit the Kyushu island and Kumamoto prefecture. So far, the impact does not appear as disruptive as 2016 earthquake in same region. For the 2026 earthquake, the optimistic scenario is for the supply chain and direct impacts to be restored in the first half of August, enabling normal production to resume at most facilities after August 17, 2026, when the traditional Japanese summer shutdown ends.  Of the approximately 37 vehicle assembly plants in Japan, through Aug 3, there has been disruption at eight of them. This has brought our estimate of potential light-vehicle production disruptive losses to 46,300 units.

The Kyushu area also is home to three semiconductor chip suppliers: Renesas, Sony, and a Japanese subsidiary of Taiwan’s TSMC. At this time, we anticipate minimal impact to light-vehicle production. Early indications are that the semiconductor manufacturing will see temporary, short-term disruption.

Iran war: Despite resilience in markets, indirect economic impact remains a risk

When the US and Iran announced a ceasefire in June 2026, our base case remained that limited military activity could occur alongside ongoing diplomacy. Into August, though we still expect both sides have incentives to avoid a wider escalation, military action has not fully ended. There are some positive indications regarding potential stability in the Strait of Hormuz into our thinking. At the same time, the instability in the situation is preventing oil-price normalization. It remains true that the recovery of oil production in the region, infrastructure and logistics will take time.

It had been expected that indirect economic impact (mainly inflation) of Iran crisis was more likely to filter through slowly; this remains true. Vehicle affordability continues to be an issue in many markets, despite this resilience. In terms of vehicle production, there remains risk for impact on downstream availability on feedstocks from the region, but through July 2026, we have not seen significant related to supply. Commodity costs have increased, however, and will further press either consumer pricing or automaker profitability.

United States Mexico Canada Agreement (USMCA): Watch and wait, expectations unchanged

On July 1, 2026, the US indicated it wanted to see the agreement between the US, Mexico and Canada reviewed. That triggers an annual review, though process details are vague. Overall, Mobility Global does expect that the tri-lateral agreement will continue, though tensions run high in the interim, particularly between the US and Canada. We continue to see a renegotiated USMCA before the US midterm elections in November 2026 with a 50% probability and for new elements added to USMCA.