Toyota Motor Corp's shares slumped as much as 4.7% as the worsening chip shortage saw the world’s No.1 automaker suspend output for several days at almost all its plants in Japan next month, forcing a 40% cut in production plans.
Adjustments will be made to the production operations of plants for completed vehicles in Japan due to parts shortages resulting from the spread of Covid in Southeast Asia, Toyota said in a statement Thursday.
A total of 360,000 cars will now be made next month. The cuts were reported earlier by Nikkei.
Some 27 lines in 14 plants in Japan will be impacted, affecting production of models from the RAV4 to Corolla, Prius, Camry and Lexus RX, Toyota said. That represents a hit to every one of the plants Toyota has across the country bar one.
“Especially in Southeast Asia, the spread of Covid and lockdowns are impacting our local suppliers,” Toyota’s purchasing group chief officer Kazunari Kumakura said. “Going forward, the company will look at ways of further diversifying its supply chains to not focus on one region and is attempting to find replacement parts from suppliers in other regions.”
Mr Kumakura declined to comment on specifics regarding Toyota’s parts shortages, but noted supply chains in Vietnam and Malaysia were particularly impacted.
Toyota maintained its annual operating profit outlook earlier this month, disappointing investors that had been buoyed by its peer-beating financial performance on the back of brisk global demand for automobiles. The carmaker kept its forecast for 2.5 trillion yen ($22.7 billion) for the fiscal year through March, versus analysts’ average projection for 2.95 trillion yen.
While a shortage of automotive chips has hindered many rivals’ ability to capitalise on strong global demand for cars over the past nine months, Toyota up until now had been relatively unimpaired due to its supply-chain savvy and the strong stock it keeps of key components such as semiconductors.
An alarming Covid outbreak in Southeast Asia has, however, weighed on the company. Toyota also has a large manufacturing presence in Thailand, where case numbers have been hitting records.
Last month, Toyota said it was extending production halts in Thailand due to Covid-related parts shortages. The carmaker’s plants in the country have combined production capacity of 760,000 units per year.
Volkswagen may also need to cut production further due to a semiconductor supply crunch, the German carmaker said on Thursday.
The auto industry is facing renewed strains after a recovery in demand stretched supply chains earlier this year.
"We currently expect supply of chips in the third quarter to be very volatile and tight," Volkswagen, the No.2 volume carmaker behind Toyota, said in answer to a request for comment by Reuters. "We can't rule out further changes to production."
The Wolfsburg-based carmaker said it expects the situation to improve by the end of the year and aims to make up for production shortfalls in the second half as far as possible.
Shares in European carmakers and suppliers were also broadly weaker across with BMW, Daimler, Renault , Stellantis and Volkswagen all down by more than 2%.
Ford Motor Co on Wednesday said it would halt output for a week starting Monday at production lines that build its best-selling F-150 pickup trucks because of the shortage. General Motors Co suspended production for a week at three North American truck plants earlier this month because of the same issue.
Nissan Motor earlier this month halted output for two weeks at a major Tennessee plant due to the impact of Covid-19 in Malaysia and chip issues.
The latest production woes follow news that German chipmaker Infineon, the top automotive supplier, had been forced to suspend production at one of its plants in Malaysia in June due to a coronavirus outbreak.
Infineon CEO Reinhard Ploss said on Aug 3 that the automotive industry faced "acute supply limitations across the entire value chain" and it would take until well into 2022 for supply and demand to be brought back into balance.
Meanwhile, three Democratic US senators on Wednesday asked the Taiwanese government for more help to address an ongoing chip shortage that has left numerous American auto production lines standing idle at times, according to a letter reviewed by Reuters.
The letter, dated Aug 18 and not previously made public, was sent by Michigan Senators Gary Peters and Debbie Stabenow and Ohio's Sherrod Brown to Taiwan's de facto ambassador in Washington, Hsiao Bi-khim, praising his "efforts to address the shortage".
But the senators added they were "hopeful you will continue to work with your government and foundries to do everything possible to mitigate the risk confronting our state economies."
Taiwan's Economy Ministry said on Thursday it was not able to immediately comment.
An auto trade group has estimated that because of the chip shortage, there could be 1.3 million fewer vehicles made in the US in 2021, a drop of more than 10% from pre-pandemic levels.
The senators told Hsiao "what we are hearing at this point is that the risk of shortages clearly has extended into 2022, despite the considerable efforts in Taiwan to augment production."
Last month, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) , the world's largest contract chipmaker, said the auto chip shortage will gradually tail off for its customers from this quarter, but that it expects overall semiconductor capacity tightness to extend possibly into 2022.
TSMC declined to comment on the letter.
"Demand for vehicles — from cars to commercial trucks — is now up, yet the lack of semiconductor chips is preventing this renewed demand from being met," the senators wrote.
"At a time when our manufacturers should be adding extra shifts, they have had to idle US plants or curtail production. The US is now the most impacted region in the world."
The senators offered Taiwan help in addressing ongoing pandemic-linked issues.
"As policy leaders, we share a keen understanding of the challenge your country is facing and appreciate the steps you are taking to protect both the human and economic health of your country," they said.
In June, the United States sent Taiwan 2.5 million Covid-19 vaccine doses, more than three times the initial allocation of shots for the island.
The senators said they backed "President (Joe) Biden's efforts to make excess vaccines available to Taiwan."