Toyota cuts production by 40 percent due to chip shortage September

*Analysts say it may not be a good time for consumers ‘to buy a new car’ as the global shortage of new vehicles may not end anytime soon, or possibly by the end of 2021

Gbenga Kayode | ConsumerConnect

As the far-reaching effects of the outbreak of the novel Coronavirus (COVID-19) continue to disrupt the global economy, the pandemic-induced computer chip shortage is still wreaking havoc on the automotive industry.

ConsumerConnect had reported that after taking a bite out of Ford and GM’s plans in the past several months in the automobile manufacturing industry.

Now, it is laying waste to Toyota’s production as well.

Scarcity of chips for automobiles

It was learnt the world’s largest automaker disclosed that it is compelled to reduce its global production by 40 percent September 2021.

By implication, the automaker will produce 360,000 fewer vehicles than it originally planned, agency report said.

While Toyota says the rise in COVID-19 cases in Vietnam and Malaysia made the semiconductor shortage worse, the effect is being felt across almost all of its plants, including ones in Japan, North America, China and Europe.

Kazunari Kumakura, Toyota’s Global Procurement Chief, said: “It became difficult to secure the necessary volume for several parts, which led to this sudden and large-scale production cut.”

On how the stifling business environment is being felt on the bottom line, report indicates that hitherto, Toyota has been able to withstand the pandemic’s impact in areas where many of its peers have not.

Indeed, the automaker was able to record profits, according to report.

Nonetheless, this news is already taking a toll, as by midday Thursday, August 19, 2021, shares of Toyota stock had fallen by 7.44 points (-4.24%).

The Motley Fool’s John Rosevear stated that “the new cuts could mean rougher seas ahead for all global automakers, and their shareholders.”

This suggests that the global shortage of new vehicles may not end anytime soon or possibly by the end of 2021, report noted.

“I think this Toyota news suggests that we should expect automakers’ shipments and revenue to remain well below pre-pandemic levels for a while longer — certainly beyond the end of 2021,” said Rosevear.

Impact on consumers

In terms of the impact on automobile consumers, the chip shortage is causing a ‘yin and yang’ effect that’s comparable to what the stakeholders are witnessing in the housing market.

It’s a good time to be a seller, but it’s not great if you’re a buyer, report said.

Automobile valuation analyst Curtis Moldrich was quoted to have said: “In short, waiting lists are getting longer, and some vehicles are being built with different electronic systems in order to keep production lines running.

“If you’re looking to jump waiting lists by buying used, prices are on the rise as the used car market becomes stronger.”

Prices are on the rise for used cars as the chip shortage rages on, especially for low-mileage, recent model cars in good condition.

According to the US Bureau of Labour Statistics, the cost of used cars and trucks rose 41 percent from July 2020 to July 2021, report stated.

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