Toyota will reduce its global car production by 40% this September due to a shortage of microchips all across the world.
The world’s largest car maker had planned to make about 900,000 cars next month, but has now reduced its production plans to just 540,000.
Why Chip Shortage?
Volkswagen, the world’s second-largest manufacturer of automobiles, has also said that it may also be pushed in to reducing production capacity.
The Covid pandemic and followed lockdowns have drastically increased the demand for chips used in electrical appliances such as phones, TVs, and console games.
On Thursday, German company Volkswagen, which cut production earlier this year, told Reuters: “We now expect the supply of chips in the third quarter to be low and inefficient.
“We cannot prevent further changes in production.”
What Are Other Companies Doing?
Other Toyota peers in the industry, including General Motors, Ford, Nissan, Daimler, BMW and Renault, have already reduced production after facing the impact of a global chip shortage.
So far, Toyota has been able to avoid doing the same.
New cars tend to use more microchips but Toyota was doing good from having more chips in stock- also called semiconductors – as part of the revitalization of their business continuity plan, built after the earthquake and tsunami a decade ago.
Toyota Factories In Asia
The decision to cut production has now been announced due to the re-boost in COVID cases in Asia.
Toyota Asian factories will be affected. But a Toyota UK spokesman in Burnaston, Derbyshire, said: “As far as we know we don’t see any impact on UK production” due to the cuts announced in Japan on Thursday.
Toyota’s overall goal was to make up for any lost volume by the end of 2021, he added.
A wide range of businesses from car manufacturers to small equipment manufacturers have been hit by chip shortages.
Problems began to emerge last year when Apple had to push the release of its iPhones, while the new Xbox and PlayStation consoles failed to meet the total consumer demand.
Since then, one technology company after another has warned of the consequences.
‘Worst Is Yet To Come’
And last month, Intel chipmaker’s chief Pat Gelsinger said the world’s biggest problem in chip industry was yet to come.
Mr Gelsinger predicted that the shortfall would worsen “in the second half of this year” and would be “a year or two” before supplies returned to normal.
The shortage has prompted U.S. President Joe Biden to sign an executive order to deal with the issue. He promised to seek $ 37bn in funding to increase chip production in the US.
Shares of Toyota fell 4.4% on Thursday, the biggest daily decline since December 2018.