Toyota To Cut Production by 40% In September Due To Chip Shortage And Pandemic Resurgence

Japans auto major Toyota Motor Corp has become the last major global auto company to cut down its production because of the global chip shortage as the company announced a cut in its global production of vehicles for September by as much as 40 per cent compared ot its previous target.

The company has however said that it has not changed its annual production and sales targets.

The major reason for Toyota to have been able to avert production cuts because of the global semiconductor shortage was because of the large stockpile of chips according to a business continuity plan that the company had adopted after the 2011 earthquake and the Fukushima nuclear disaster which had severely hampered its supply of chips for vehicles.

Its previously announced target of global production of 9.3 million vehicles as well as its target for sale of 8.7 million cars for the year ending in March was reiterated by the world’s largest automaker by sales volumes on Thursday.

“The 9.3 million global production plan takes into account certain risks,” the firm’s executive Kazunari Kumakura told reporters. “We want to achieve the numbers.”

The curb in production for September will be implemented in 14 factories in Japan and in overseas locations, Toyota said, adding that its planned global production for the month would be reduced by 360,000 vehicles.

Out of he planned production cuts, 140,000 less vehicles would be made in its Japanese plants while the rest of the cuts will be spread in its the facilities in the United States, China, Europe and other Asian countries.

The ongoing shortage of chips has for months forced car making companies around the world to cut down production. The crisis has been compounded in recent weeks because of a resurgence in fresh Covid-19 infections in Japan, Philippines, Thailand, Vietnam and Malaysia – where a majority of the chip plants and auto factories are located, which has caused imposition of strict restrictions.   

There could also be a requirement for further production cuts at its factories, Germany’s Volkswagen said on Thursday, because of an anticipated issue with the supply of chips in the third quarter which the company described would likely be “very volatile and tight.”

A day ago on Wednesday, the United States based Ford Motor Co said that it will implement a temporary shutdown of its Kansas City assembly plant that builds its best-selling F-150 pickup truck because of the semiconductor related shortage of parts which in turn is due to the rising cases of the pandemic in Malaysia.

An unpredictable business environment was flagged by Toyota earlier this month because of fresh outbreaks of Covid-19 cases in emerging economies, the global chip shortage and surge in material prices.

Between late July and early August, assembly lines at some Japanese factories had already been halted by the Japanese car maker, including at the firm’s Tahara plant, because of a n increase in Covid-19 infections in Vietnam which had impacted the supply of parts.

(Adapted from Reuters.com)

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