Toyota will cut global output by 40% in Sept. on chip shortage

TOKYO – Toyota Motor Corp., which until now has largely skirted the supply chain woes that hampered rivals worldwide, will slash global output some 40 percent in September as it finally feels the bite of the pandemic and the global shortage of automotive microchips.

In announcing the hit on Thursday, Toyota blamed the suspensions on bottlenecks in worldwide chip supplies and the outbreak of the COVID-19 delta variant in Southeast Asia.

The sweeping shutdowns, which begin in August and run through the end of September, will hammer Toyota output in every major market -- Japan, the U.S., Europe, China and Asia.

Japan’s biggest automaker expects to lose 360,000 vehicles of output globally in September alone. North American operations will lose about 80,000 vehicles, Europe about 40,000 vehicles, China some 80,000 and other Asian operations will feel an 8,000-vehicle impact.

The cutbacks will affect 14 Toyota assembly plants in Japan and 27 of 28 production lines here. Toyota said it expects to lose about 140,000 units of production from home-market factories in September, on top of another 20,000 units lost through dial backs in August.  

Affected factories include the Takaoka and Tsutsumi plants in Japan, which together build the RAV4 and Harrier crossovers and Corolla and Camry sedans, as well as the Prius hybrid, among other nameplates. Also affected is the Tahara plant that makes the Lexus LS, IS, RC, RCF and NX models.

The loss represents about 40 percent of Toyota’s initially planned global output for September.

Despite the worldwide suspensions, Toyota said that, for now, it was holding steady its production plan to build 9.3 million vehicles globally in the current fiscal year ending March 31, 2022. That total covers output only from Toyota and Lexus, not Daihatsu or Hino.

“We have factored in risk factors in our annual plan. But as for September, the impact came sooner and deeper than expected,” Chief Communications Officer Jun Nagata said.

Global procurement manager Kazunari Kumakura said there are continuing supply chain risks and would not say when the global crunch might ease. He also declined to say what suppliers were affected or what kinds of components were in especially short supply.

"In October and beyond, we think there are risks so we will monitor the situation every day, going forward. In October and beyond, we would like to recover as much as we can, but we already have tight production plans," Kumakura said, adding that Toyota wants to still reach 9.3 million.

"We will do our utmost to achieve this target."

Global impact

Toyota had intended to build around 900,000 vehicles worldwide in September. The new plan marks a large drop from that goal and from the 973,000 vehicles Toyota produced in September 2020, just as it began recovering from the pandemic shutdowns in the early part of last year. In September 2019, before COVID-19 struck, Toyota manufactured 905,000 vehicles worldwide.

Because the pandemic is disrupting supplier operations in Southeast Asia, it is affecting Toyota operations worldwide that depend on those parts. The impact underscores the fragile, highly interconnected nature of today’s global automotive business.

This month, Japanese rival Nissan Motor Co. said it would idle its massive plant in Smyrna, Tenn., for two weeks because of a COVID-19 outbreak at a microchip supplier plant in Malaysia.

Toyota declined to identify the supplier or the parts that triggered its latest suspensions.

AutoForecast Solutions has estimated the chip shortage has resulted in the loss of 5.96 million vehicles from production plans globally. AFS forecasts the toll eventually could rise to 7.1 million.

Toyota has largely confounded the industry by ramping up output and notching record profits despite the pandemic-microchip double whammy. In the company’s fiscal first quarter ended June 30, the Japanese juggernaut reported all-time high quarterly operating profit as well as record fiscal first-quarter results for net income, revenue and global retail sales.

Toyota had previously credited its stellar supply chain management – marked by bigger inventories of key parts, higher visibility into operations at lower-tier parts makers and more strategic long-term planning – for helping it avoid big interruptions.

Warning signs

But even Toyota has not been completely problem-free. In a sign of brewing trouble, Toyota shut down multiple lines at four plants in Japan for several days in early August. It cited a shortage of parts resulting from the spread of COVID-19 in Southeast Asia, where plants were closed because of pandemic shutdowns. Those suspensions affected output of certain Lexus models and other nameplates, including the Land Cruiser, Corolla and Alphard and Voxy vans.  

And the day before this week’s announcement, Toyota suspended output at all three of its plants in Brazil because of supply disruptions from Southeast Asia triggered by the pandemic.

In Thailand, one of Toyota’s three assembly plants there has been suspended since July 21.

For the first six months of 2020 through June, Toyota’s global production was up 35 percent to 5.30 million vehicles, and global sales were up 31 percent to 5.47 million. Even a cutback of more than 300,000 vehicles in September would represent a relatively small percentage of Toyota’s annual production volume, which reached 9.21 million vehicles in calendar year 2020.

Toyota’s output, including production at Daihatsu and Hino, peaked at 10.73 million vehicles in calendar year 2019. Toyota does not announce calendar-year production forecasts.

But last month, Toyota said it planned to build some 9.3 million vehicles in the current fiscal year to March 31, 2022. But that total is not a direct comparison because it excludes Hino and Daihatsu.

Naoto Okamura contributed to this report.