Toyota May Cut Global Production by 40% During September due to Chip Shortage

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The automotive manufacturing firm Toyota has recently decided to cut down their vehicle production worldwide by 40% in the month of September due to the global semiconductor chip shortage. The world’s largest car-making company has made plans to make around 900,000 vehicles in the next upcoming month but has recently decided to reduce it to 540,000 cars, which was caused by the worldwide chip shortage for the past several months.

Industries affected by shortage

The second-biggest car manufacturing firm Volkswagen has given a warning that it may also have to suffer from the forced cutting of output further in the future if the issue revolving around the chip shortage in the world is not resolved.

Due to the onset of the coronavirus pandemic has surged the demand for appliances that require a semiconductor chip to function, including items like game consoles, TVs, and smartphones. On Thursday, Volkswagen, which has been able to reduce their output in the first half of this year, has given a public statement saying that they are currently expecting to receive a shipment of chips in the third quester of this year to be very tight and volatile. The firm is unable to rule out any more changes in its production plans.

The other rival firms of Toyota, including BMW, Nissan, Daimler, Renault, Ford, and General Motors, have already reduced their production scale due to the ongoing chip shortage. Until now, the same turn of events was being avoided by Toyota, with a small exception of the extension of the shutdown in summer for a week in France, turkey, and the Czech Republic.

New vehicles are often embedded with dozens of microchips, but the benefit which is being gained by Toyota from having been able to build a massive chips stockpile, which is also known as semiconductor chips, as a part of their revamp regarding their business continuity plans, which had been initially developed after the Tsunami and earthquake in Fukushima about a decade ago, and had been less affected by the global chip shortage.

Effect of COVID-19 pandemic

The decision which has been taken to reduce the output now has been triggered by the reappearance of the COVID-19 infection around the globe, which has taken a large hit on the supplies in Asia. Toyota is likely to make several cuts in the month of August for their manufacturing plant located in Japan along with some other countries due to the onset of chip shortage in the firm.

The bulk number of cuts, which is about 360,000, is to come in the upcoming month of September and would be directly affecting Toyota factories present in Asia along with the United States.

Meanwhile, in the United Kingdom, Toyota has been able to develop a car plant in Burnaston, Derbyshire, along with an engine manufacturing plant on Deeside. In a public statement, Toyota stated that the firm is currently going to great strengths to reduce the impact of supply due to chip shortage, which has caused a major impact on the global industry of automobiles.

In terms of the production operation of Toyota in the United Kingdom, the firm is currently trying to operate as previously planned at both of their manufacturing plants.

The aim of the automotive firm as a whole is to make up for any amount of lost quantity by the end of the year 2021, as the chip shortage is resolved.

Due to the semiconductor chip shortage across the globe, a wide selection of businesses to manufacturers of small appliances, to the automotive industry have been affected by it. Several issues had started to emerge in the previous year when Apple had to suffer from the release of their new iPhone model, while PlayStation and Xbox consoles also failed to reach the required demand of products at launch.

Due to these events, the technology companies have started to give prior warnings regarding the effects that are going to occur from the onset of chip shortage in the world.

In the month of July this year, the head of the chip-making firm Intel, Pat Gelsinger, stated that the worst turn of events in the crisis surrounding the global chip shortage is yet to come for the world, as it is likely to further worsen in the second half of the year 2021. Meanwhile, it would require a year or maybe two before the supplies return back to their normal amount.

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