Out of the blue, Toyota has revealed a 40% cut in planned vehicle production for September as the Covid-driven global shortage of computer chips caught up with the world’s biggest carmaker.
The Japanese giant became the last major automaker to cut output due to a global chip crunch, but it maintained its annual sales and production targets, indicating it plans to expand output over the next six months (to the end of its financial year next March).
Car makers worldwide have been cutting production due to the chip shortage, but a resurgence in COVID-19 cases in Japan, Philippines, Thailand, Vietnam and Malaysia – home to auto factories and chip plants – have led to stricter curbs and compounded the crisis.
But that might be ambitious became the Number 2 maker, Volkswagen says it plans bigger cuts to production than previous announced because the supply of valuable computer chips has not picked up enough to guarantee output levels in the third quarter.
General Motors has already cut production targets for this year as have other major groups.
Ford said Wednesday it will temporarily shut its Kansas City assembly plant in the US that builds its best-selling F-150 pickup truck due to a semiconductor-related part shortage as a result of rising Covid cases in Malaysia where its suppliers are located.
Toyota has been confident it would ride out the chip shortage (and had in fact predicted it would when releasing its 2020-21 financial results in May).
The company had built a stockpile of chips under a business continuity plan adopted after the 2011 earthquake and the Fukushima nuclear disaster, but now says that reserve will not be enough to maintain production at current levels for the rest of the year.
Toyota 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 US, China, Europe and other Asian countries such as Thailand.
Toyota shares closed down 4.4% in their biggest daily drop since December 2018, pulling the benchmark Nikkei average to a seven-month low.
The Japanese business newspaper, Nikkei reported on Thursday that Toyota had already halted assembly lines at some Japanese factories between late July and early August, due to a surge in infections in Vietnam which had constrained the supply of parts.
Reuters says Toyota had also suspended production at one assembly line in Guangzhou, China, (which it operates with its Chinese joint-venture partner Guangzhou Automobile Group Co), while the company has suspended production last month at three factories in Thailand due to a pandemic-related parts shortage.
Some of the cars made in Thailand are shipped to Australia, so the current shortage here looks likely to continue for some models. Honda also has the biggest southeast Asian car plant in Thailand that supplies many models to Australia.
Investors in Tokyo took fright at the news and cut the price of Toyota shares by 4%, its biggest drop for 18 months (since the start of the pandemic).
