Toyota to shut down production, chip shortage

Toyota is set to cut down vehicle production by 40% because of the ongoing global chip shortage. It had plans to manufacture 900,000 cars next month, but has now been reduced to 540,000.

This is Toyota’s first major production cutback since the semiconductor shortage began affecting vehicle production at other automakers earlier this year. The chip shortage continues to hit the global auto industry as automakers navigate a sharply constrained supply chain of chips. The carmaker had previously credited its stellar supply chain management, marked by bigger inventories of key parts, higher visibility into operations at lower-tier parts makers and more strategic long-term planning, for helping it avoid big interruptions.

Toyota, as per Reuters, said the September cuts included 14 factories in Japan and overseas plants, and that the company would reduce its planned global production that month by around 360,000 vehicles. Of these, 140,000 will be at Japanese plants, with the rest in the United States, China, Europe and other Asian countries. A source told Reuters this month that Toyota had also suspended production at one assembly line in Guangzhou, China which operates with its Chinese joint-venture partner Guangzhou Automobile Group Co. Ltd. In Thailand, the carmaker suspended production last month at three factories due to a pandemic-related parts shortage.

Earlier this month, Toyota had flagged an unpredictable business environment due to fresh COVID-19 cases in emerging economies, the semiconductor shortage and soaring material prices. As such, Toyota shares closed down 4.4% in their biggest daily drop since December 2018, pulling the benchmark Nikkei average (.N225) to a seven-month low.

Despite the suspensions, Toyota said that, for now, it was holding steady its production plan to build 9.3 million vehicles globally in the current fiscal year ending March 31, 2022. The total covers output only from Toyota and Lexus, not Daihatsu or Hino. Kazunari Kumakura, Global procurement manager, highlighted that there are continuing supply chain risks and would not say when the global crunch might ease. He also declined to say what suppliers were affected or what kinds of components were in especially short supply.

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“In October and beyond, we think there are risks so we will monitor the situation every day, going forward. In October and beyond, we would like to recover as much as we can, but we already have tight production plans,” Kumakura said and added that Toyota wants to still hit 9.3 million. “We will do our utmost to achieve this target.”

AutoForecast Solutions has estimated the chip shortage has resulted in the loss of 5.8 million vehicles from production plans globally. AFS forecasts the toll eventually could rise to 7.1 million.