Toyota To Cut Production By As Much As 20 Percent

The car industry continues to feel the impact of global parts shortages, most notably semiconductor shortages, with Toyota issuing a fresh warning.

The Japanese car giant announced on Tuesday that it was again making “adjustments” to its domestic production of vehicles, “citing a “parts shortage resulting from the spread of Covid-19.”

In January a leading car industry trade group has painted a bleak picture for 2022 and the impact that the ongoing global chip shortage will continue to have during the coming 12 months.

Chip shortages

The Society of Motor Manufacturers and Traders (SMMT) said that the chip shortage will continue to hurt British car sales throughout this year and into 2023, after making a serious dent in vehicle supply in 2021.

It comes after the chip shortage already severely impacted global car production during 2020 and 2021.

In August last year for example Toyota warned that its worldwide vehicle production would be slashed by 40 percent in September because of the global chip shortage.

Then in October the French car maker Renault said it expected to produce at least 300,000 fewer vehicles in 2021.

Fears of ongoing chip shortages have not been helped after it emerged last week that Ukraine’s two leading suppliers of neon, which produce about half the world’s supply of the key ingredient for making chips, have halted their operations.

Last month as Russia’s invasion of Ukraine began, large chip companies said they expected limited supply chain disruption for now from the conflict, thanks to raw material stockpiling and diversified procurement.

Ukraine supplies more than 90 percent of US semiconductor-grade neon, and neon is critical for the lasers used in chipmaking.

The gas, a biproduct of steel manufacturing in Russia, is purified in Ukraine before being exported.

Toyota production

Against this backdrop, Toyota on Tuesday confirmed it will make additional production cuts in March due to a shortage of semiconductor chips.

This comes days after the Japanese car giant reduced its domestic production target by as much as 20 percent for the second quarter (April-June).

“We at Toyota have made repeated production plan adjustments due to a parts shortage resulting from the spread of Covid-19, causing considerable inconvenience to customers and others concerned,” it said.

“We must now inform you of additional production suspension in March due to the semiconductor shortages,” it added. “We again offer our sincerest apologies to our customers and suppliers for any inconvenience these adjustments may cause.”

Toyota said it would suspend production on one line at a factory for eight weekdays starting 22 March through the end of the month.

That is in addition to the suspension of domestic production at two factories announced last month.

Production of about 14,000 Noah and Voxy minivans would be affected by the latest suspension, a Toyota spokesperson told Reuters.

It comes after Toyota last week said it would lower production for three months starting April to ease the strain on suppliers, which were struggling with the shortages of chips and other parts.

Other car makers

Toyota is also halting production at its joint venture plant with FAW Group in the city of Changchun, China, due to fresh Covid-19 restrictions. Hong Kong in particular has been badly hit by a fresh outbreak of Coronavirus.

Despite all these production cuts, Toyota is seeking to maintain its 8.5 million vehicle production target for the year, the spokesperson told Reuters.

And it is not just Toyota making this production cut decisions.

American EV maker Rivian was sued last week by disgruntled shareholders, but it also warned that supply-chain issues could force it to cut planned production by half this year.

German car giant Volkswagen meanwhile said on Tuesday it sold 2 million fewer cars than planned last year due to the chip shortage and warned that ongoing supply bottlenecks, high commodity prices and the Russia-Ukraine conflict could hit growth in 2022.

Most car makers have also halted the export of their cars into Russia, amid tough global sanctions against the country.

Reuters reported that Toyota, Volkswagen and other car makers have also stopped production at their Russian factories.