Toyota cuts production by 40%, closes factories amid chip shortage, increase in COVID-19 cases

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The news: The world’s second-largest auto maker and leading Japanese automaker on Thursday announced it was cutting production in Japan and North America by 40 percent and shutting factories, through The Wall Street Journal. This in turn could lead to vehicle shortages and price hikes.

  • Toyota is closing its main factories in Toyota City as well as the Tsutsumi factory from September 1 to 17. The company said that a declaration that 27 production lines in 14 factories around the world will be blocked in September.
  • The cuts halt production of its top-selling vehicles, including the RAV4 SUV and the Corolla, Camry, and Lexus ES sedans.
  • Chip shortage could cost the auto industry dearly over $ 61 billion in sales this year, by Bloomberg.

How we got here: The global chip shortage has put increasing pressure on automakers, PCs and electronics makers, whose chip stocks have been depleted.

  • The surge in COVID-19 infections in Southeast Asia, combined with the highly contagious delta variant and relatively low vaccination rates, has also caused production to stall, especially in Malaysia, which is a hub of semiconductor assembly.

The overview: Thanks to component inventories and long-standing relationships with its suppliers, Toyota has been able to isolate the early effects of the global chip shortage, according to the Wall Street Journal. Competitors like Ford, Fiat Chrysler, and Nissan felt the pinch more intensely.

The global chip shortage, which is expected to run until 2023, shows that even the best prepared companies are burning their chip supply and being forced to cut back on production.


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