Automakers continue cutting back production due to the ongoing semiconductor shortage, as well as the COVID-19 lockdown in Shanghai – but Toyota has the distinction of cutting back output twice in one week.
On Tuesday, the Japanese giant said it would reduce global production by 100,000 vehicles, Now, it has slashed another 50,000 vehicles from its plans. That brings May output down to a planned 800,000.
And Toyota warned there is the “possibility” it will make even further cuts during the rest of its fiscal year, which runs through the end of March 2023. As it is, Toyota already has reduced its plans for that period down to 9.7 million, the first time production has dropped below 10 million in some time.
More cuts coming?
If anything, it seems highly likely Toyota will have to make additional cuts, several industry analysts told TheDetroitBureau.com. It certainly would have plenty of company. Virtually every major automaker has been forced to trim output this year as the shortage of semiconductors continues to drag on.
Earlier this year, Toyota scheduled production cuts in April, May and June due to the chip shortages.
But there are other factors now coming into play, and the automaker’s latest cuts are primarily driven by the pandemic. China has extended lockdowns in its largest city, Shanghai – which is also its largest automotive manufacturing center – due to a new outbreak of COVID-19.
The crackdown by authorities hoping to arrest the spread of the disease has created chaos for the auto industry, impacting manufacturers such as General Motors, Volkswagen and Tesla, as well as Toyota. The situation has been compounded by the fact that Shanghai parts plants service auto assembly lines in other markets, including Japan and the U.S.
Some Toyota plants in its home market will continue to be impacted through the week of June 6th.
“It is very difficult to estimate the current supply situation of parts due to the ongoing lockdown in Shanghai,” Toyota said in a statement.
China under pressure to ease lockdowns
Chinese officials have come under pressure to ease its strict Zero-COVID restrictions in Shanghai and auto production has begun to accelerate again. Tesla added back a second shift at its plant on Thursday, while local automaker Xpeng has its plant running again.
The Shanghai lockdown complicates what is already a bad situation due to the semiconductor shortage. Resulting production cuts have left dealers around the world struggling to meet consumer demand.
Where automakers traditionally like to have about a 60-day supply of new vehicles on American showroom lots, the figure is below 30, according to industry data. Toyota is averaging less than 10 days’ of supply, the automaker has noted in recent weeks. And the latest cuts won’t help.
They’re expected to impact availability of the 4Runner, Corolla, Prius and RAV4 models, in particular.
After rebounding from the pandemic in 2021, U.S. sales have plunged so far this year and are expected to be down 18% for May, according to the J.D. Power. On an annualized basis, they’re expected to dip to 13.3 million, 3.3 million below May 2021’s pace.
While industry planners are hoping China will continue easing back on Shanghai’s pandemic restrictions, the broad consensus is that chip shortages will extend through the end of this year and even into 2023.