Take a fresh look at your lifestyle.

Chip shortage forces Toyota to cut production by 40 percent

Toyota, the world’s largest automaker, will cut its global car production by 40 percent next month, amid pressure from the persistent shortage of chips.

The shortage of semiconductors has been caused by a combination of factors: pandemic-related plant closures; increasing demand for chips to support remote working and studying; and the trade war between the US and China. The automotive sector has been one of the hardest hit, with Ford, Jaguar Land Rover, Volkswagen, General Motors, Nissan, Daimler, BMW and Renault closing factories, scaling back production or excluding high-end features such as integrated satellite navigation systems.

So far, Toyota, which had been preparing by stockpiling semiconductors, was relatively unaffected by the chip shortage, which only extended summer shutdowns in France, the Czech Republic and Turkey by a week.

Toyota had planned to produce nearly 900,000 vehicles by September. It has reduced its production plans to 540,000 vehicles. It will start austerity this month, with Asian and North American factories hardest hit; 14 of its Japanese factories will close on certain business days in the coming weeks. The production of the most luxurious models will be completely stopped until September.

The aim is to compensate for any lost production volume by the end of 2021.

With regard to its car plant in Burnaston, Derbyshire, and its engine plant in Deeside, North Wales, Toyota said it was continuing production as previously planned.

“Toyota is committed to minimizing the impact of the semiconductor shortage affecting the global automotive industry. As for our manufacturing operations in the UK, we are currently working as planned,” said a statement from Toyota.

Volkswagen, the second-largest automaker, has indicated that it may be forced to further reduce its production. The company told Reuters: “We currently expect chip supply in the third quarter to be very volatile and tight. We cannot rule out further changes in production.”

The chip shortage is unlikely to go away anytime soon. In June, Intel CEO Pat Gelsinger warned that it could take many years to resolve the shortfall as supply chains grapple with “explosive growth” in semiconductor demand. Intel plans to expand its chip manufacturing business in the US with a $20 billion investment in two new Arizona advanced chip manufacturing plants. The expansion is good news for the Biden administration, which hopes to support domestic chip production with a $37 billion investment and rebalance its supply chain imbalance, which is heavily focused on East Asia.