Toyota cuts production target on parts and chips shortages

Toyota Motor Corp cut its annual production target by 300,000 vehicles on Friday as rising Covid-19 infections slowed output at parts factories in Vietnam and Malaysia, compounding a global shortage of auto chips.

“It’s a combination of the coronavirus and semiconductors, but at the moment it is the coronavirus that is having the overwhelming impact,” Kazunari Kumakura, an executive at the world’s biggest carmaker, said after the company revised its production target.

Unlike other big global automakers that were forced earlier to scale back production plans, Toyota had managed to avoid cuts to output because it had stockpiled key components along a supply chain hardened against disruption following northeast Japan’s devastating earthquake in 2011.

The Japanese carmakers’ announcement on Friday is a further sign that no part of the global car industry has escaped the affects of a pandemic that has sapped sales and is hobbling the their ability to take advantage of the recovery in demand that followed the initial waves of Covid-19.

Car sales in China in August fell by almost a fifth from a year earlier because there were fewer vehicles for people to buy.

Toyota now expects to build 9 million vehicles in the year to March 31, rather than 9.3 million. It did not revise its 2.5 trillion yen (US$22.7 billion) operating profit forecast for the business year.

Adding to a 360,000 vehicle cut in worldwide production in September, Toyota said on Friday it will reduce output by a further 70,000 this month and by 330,000 in October. It hopes to to make up some of that lost production before its year-end.

Demand for chips has soared during the pandemic as consumer electronic companies rush to meet stay-at-home demand for their smartphones, tablets and other devices.

A heavy reliance on Southeast Asian factories for parts is a headache for Toyota, but it’s also a problem for its rivals that have struggled with what Volkswagen AG has described as “very volatile and tight” chip supplies.

The German carmaker has warned it may need to cut production further as a result. Ford Motor Co last month shut down production at a plant in Kansas that builds its best-selling F-150 pick-up because of parts supply woes, with France Renault SA extending partial stoppages at factories in Spain.

German luxury carmaker Daimler this month said it expects chip shortages to significantly lower third quarter sales.