Chip shortage forces Toyota to slash production by 40 per cent

The semiconductor shortage has been brought on by a combination of pressures: pandemic-related factory closures; increasing demand for chips to support remote work and study; and the trade war between the US and China. The automotive sector is among the worst affected, with Ford, Jaguar Land Rover, Volkswagen, General Motors, Nissan, Daimler, BMW and Renault shutting factories, scaling back production, or excluding high-end features such as integrated satellite navigation systems.

Until now, Toyota – which had prepared by stockpiling semiconductors – had been comparatively unaffected by the chip shortage, only extending summer shutdowns by a week in France, the Czech Republic and Turkey.

Toyota had planned to produce almost 900,000 vehicles during September. It has cut its production plans to 540,000 vehicles. It will start making cuts this month, with its Asian and North American factories worst affected; 14 of its Japanese factories will close on certain working days over the coming weeks. Production of the most luxurious models will be suspended entirely through September.

It aims to compensate for any lost production volume by the end of 2021.

Regarding its car plant in Burnaston, Derbyshire, and its engine plant in Deeside, North Wales, Toyota said that it was going ahead with production as previously planned.

“Toyota is going to great lengths to minimise the impact of the semiconductor supply shortage that is globally impacting the automotive industry. In terms of our UK production operations, we are currently operating as planned,” a Toyota statement said.

Volkswagen, which is the second-largest automaker, has indicated that it may be forced to cut its output further. The company told Reuters: “We currently expect supply of chips in the third quarter to be very volatile and tight. We can‘t rule out further changes to production.”

The chip shortage is unlikely to pass quickly. In June, Intel CEO Pat Gelsinger warned that it could take many years for the shortage to be resolved as supply chains struggle under the “explosive growth” in semiconductor demand. Intel plans to expand its US chip manufacturing operations with a $20bn investment towards two new Arizona factories for advanced chip manufacturing. The expansion is good news for the Biden administration, which hopes to support domestic chipmaking with a $37bn investment and rebalance the unbalanced supply chain, which is strongly centred on East Asia.