Image by AFP

On Tuesday, Toyota Motor Corporation announced that global production for June would experience further adjustments as the carmaker grapples with supply chain issues. Of a previously forecasted 950,000 units built for the month, Toyota is now revising it down to 850,000 units globally. 

The news release prescribes 10 May and June factory suspensions and spans 16 lines, lasting up to five days. Corolla, C-HR, and RAV4 models are the primarily affected models that will impact North American markets.

In their statement, Toyota said, “The shortage of semiconductors, spread of COVID-19, and other factors are making it difficult to look ahead, but we will continue to make every effort possible to deliver as many vehicles to our customers at the earliest date.”

Despite the adjustment to monthly production, the full-year forecast of 9.7 million units has not been changed. That may be due to an inability to see what the future holds for the supply chain and production. 

Semiconductor chip shortages wreak havoc

The change once again stems mainly from issues sourcing semiconductor chips from suppliers that have struggled to fill orders in the automotive industry. While Toyota was positioned at the beginning of the pandemic with a stockpile of chips – even allowing Toyota to slip into first place for North American sales in 2021 – replenishing the depleted stock has proved more challenging. 

The Japanese carmaker has consistently had to revise its production targets this year. Their announcement acknowledges the disruption caused while casting the blame at the feet of shortages, saying, “We at Toyota would like to again apologize for the repeated adjustments to our production plans due to the parts shortage resulting from the spread of COVID-19, and for causing considerable inconvenience to our customers, suppliers, and other parties concerned.”

Pandemic plays a part in production issues

On Tuesday, Shanghai continued to be under strict restrictions to curb the spread of COVID-19, profoundly influencing the ability for parts suppliers to meet the demand for orders. Shanghai and other areas in Asia have been under lockdowns as authorities try to eradicate the virus. Some automotive parts providers and manufacturers have been whitelisted to resume operations, but catching up with lost production will prove a challenge. 

Zhang Xiang, a research fellow at the Research Center of Automobile Industry Innovation of the North China University of Technology, told the Global Times, “Five days of overtime during the May Day holiday will go a long way toward restoring capacity, but it is unlikely to reach normal levels. Auto manufacturers will have to work overtime in the second half of the year to supplement production.”

Annual forecast likely to be adjusted in coming months

With no firm reason to believe the chip shortage will be resolved by the end of 2022 – nor by Toyota’s year-end in March 2023 – further production cuts are likely to occur in the coming months. For the previous fiscal year, Toyota missed its global production target by about half a million units. With ongoing challenges, there’s a good chance that the full-year target of 9.7 million units will fall short.

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