Toyota to slash global production by 40% due to global microchip shortage

Toyota will cut vehicle production by 40 per cent in September due to the global microchip shortage, it has announced.

The carmaker, which is the world’s largest, now expects to make 540,000 vehicles in September, down from the 900,000 it had planned.

It comes after the COVID pandemic boosted demand for electrical devices, such as phones, TVs and games consoles, with the supply of chips (itself impacted by COVID-related disruptions) unable to match this.

The shortage has hit a number of car manufacturers, with Volkswagen – the world’s second-largest carmaker – warning it may be forced to further cut output this week, after having already done so earlier this year.

In comments to Reuters, a spokesperson from the German firm said: “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.”

While Toyota had previously managed to avoid cutting production in the face of the issue, it was required to extend summer shutdowns by a week in France, the Czech Republic and Turkey.

Its earlier resilience to the issue came after it was able to stockpile a large number of chips as part of its business continuity plan developed in the wake of the Fukushima earthquake and tsunami in 2011.

Despite the cut, the company still expects to reach its global production target of 9.3 million by the year ending in March, with executive Kazunari Kumakura saying that the production goal was made taking into account “certain risks”.

The shortage comes amidst a COVID resurgence in Asia, as outbreaks have taken hold in several regions where the company operates production hubs.