Published on August 20th, 2021 | by Joshua Chin0
Toyota Cuts Global Production By 40% Due To Covid Crisis
The continued Covid crisis in ASEAN has badly scuppered Toyota’s intricate supply chains.
While nearly all automakers have been affected by the ongoing semiconductor shortage that has been plaguing the industry currently, there are nevertheless some who are weathering it better than most.
Toyota for instance has been managing to keep most of its factories running at nearly full capacity throughout this time, and has already produced some 5 million vehicles globally in the first half of 2021. An astounding feat that was made possible courtesy of its business continuity plan developed in the wake of the Fukushima earthquake a decade earlier, which required suppliers to stockpile anywhere from two to six months’ worth of chips.
Having said that however, this continued covid crisis looks to now soon be weighing down even the most prepared players within the industry. That is because even Toyota has been reported to be cutting down its global auto production by a staggering 40% come September, from a previously planned 900,000 vehicles to just producing around 540,000 units next month.
Now while the Japanese auto giant hasn’t actually officially confirmed those aforementioned numbers yet, it has however since revealed that nearly all of its plants in Japan will be suspended for a period of time in the month to come. It has also been reported that Toyota’s plants in North America and China has each been earmarked to deliver 80,000 fewer vehicles than expected, while output in Europe will be down 40,000 units against its initial plans.
It is worth highlighting at this point though that these factories aren’t to be laying idle because of Toyota has run of out chips, but is actually due to the Japanese automaker running out of other components instead. Most of which originate from South East Asian nations like Malaysia and Vietnam, where government-mandated lockdowns have forced its suppliers to cease production of these parts during this time.
With the production of only half-a-million cars next month, Toyota has effectively returned to the time of May 2020 when its European and North American factories were forced to close during the first wave of the Coronavirus. News of this sudden and significant scaling back of manufacturing by the Japanese automaker too has naturally spooked the markets, with its share prices plunging by a staggering 4.4%, their biggest daily drop since December 2018.
Despite all this doom and gloom however, Toyota has amazingly remained rather confident in hitting its 9.3 million unit annual production goal previously set by the end of the 2021 financial year in March. But there is actually good reason for the automaker to believe so, as the manufacturing sector in Malaysia at least is (slowly but surely) coming back alive after its nearly two-and-a-half-month slumber and will thus provide some much needed relief to its strained production line.
Then again though, Toyota is still being cautious in celebrating too early yet. This is especially considering there is still a massive unknown as to how fast can be ramped back up again in these factories with their limited personnel, not to mention too the constant threat of it closing down again if another Covid outbreak is detected.
Anyhow, this cautious optimism will likely be par for the course for Toyota (and indeed every other automaker) during these still troubling times. With nearly every major player in the industry posting healthy profits too during the first half of the year, it is highly unlikely than any of them would take that big of a hit even with all these added potholes in the road ahead.