Toyota to slash production by 40% as chip shortage deepens

Toyota Motor Corp updates

Toyota, the world’s largest carmaker, said it would slash its global production by 40 per cent in September after a wave of coronavirus cases across south-east Asia deepened the auto industry’s chip shortage.

The Japanese group said on Thursday it would build 540,000 vehicles next month, down from the 900,000 it had originally planned.

Almost all of its plants in Japan will be hit, with 27 production lines disrupted. Production will be hobbled across the company’s global operations, with plants in North America and China each earmarked to deliver 80,000 fewer vehicles than expected. In Europe, output will be down 40,000 against initial plans.

Toyota executives said a sudden surge in coronavirus cases in Vietnam and Malaysia had exacerbated the semiconductor shortage and also left the group short of other vehicle parts for its global network.

The two countries have critical roles in producing electronics, as well as packaging and testing components, that are used in everything from vehicles to smartphones. Toyota’s biggest manufacturing hub in south-east Asia is in Thailand, which is also wrestling with a record number of Covid -19 cases and production cuts.

“It became difficult to secure the necessary volume for several parts, which led to this sudden and large-scale production cut,” said Kazunari Kumakura, Toyota’s global procurement chief.

The cuts are a significant setback for the Japanese company, which had managed to eke out record profits despite the pandemic and the chip shortage, which has hit some rivals much harder.

Shares in Toyota fell 4.4 per cent on the news, which was first reported by Nikkei.

Until now, Toyota had managed to escape the worst of the shortage thanks to its large chip inventory and supply chain management skills honed during past natural disasters.

The carmaker declined to comment on which components faced a shortage. However, it said it had already factored in the production cuts and was sticking to its guidance to produce 9.3m vehicles worldwide in its financial year, which ends in March. 

The move by Toyota comes after Chinese carmaker Geely also this week warned of continued “uncertainty” around production because of the chip crisis. Jaguar Land Rover last month halved its sales forecast, blaming a lack of semiconductors.

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