Covid Disruptions Strike Even Toyota

Even the world's largest carmaker wasn't exempt from the damage caused by a virus that has been holding the world hostage for more than a year. The delta variant has outpaced Japanese automaker's efforts to deal with the chip supply crisis as Toyota Motor TM has warned it will need to trim annual production forecast by 3% due to supply disruptions and forced plant shutdowns.

The announcement comes less than a month after the Japanese company said it was slashing this month's global production by 40 percent because of supply chain problems.

Toyota has closed plants around the globe as parts fail to reach factories, while Stellantis STLA-owned Peugeot in Europe and Ford Motor Company F and General Motors GM in the US have cut shifts due to these supply constraints.

The Production Trim

The Japanese giant said it was reducing production by another 70,000 vehicles in September and by 330,000 vehicles in October. It expects to build 9 million vehicles by the end of the fiscal year in March, instead of the previous forecast of 9.3 million. In August, it revealed it September's output will be cut by 360,000 units.

Tundra Is Coming

After seemingly endless teasers, Toyota at least has confirmed that the 2022 Tundra pickup's debut will take place on September 19th. The new Tundra faces stiff competition from the stellar Ram 1500, new Ford Motor's F-150, and the recently refreshed Chevrolet Silverado owned by General Motors.

The EV Chapter Is In The Making

Late to the electric vehicle race, Japanese carmakers have accelerated plans as sales grow. Toyota plans to invest $13.6 billion in batteries used for electric and hybrid vehicles by the end of the decade. Although it did not disclose any plans or locations for new factories, it reveals its plans for 10 production lines by 2025, which will eventually reach 70. As a side note, a single factory can contain several production lines.

Back in May, Toyota announced it aims to sell eight million electric and hybrid vehicles by the end of the decade, including two million EVs and fuel cell vehicles. Per region, EVs and fuel-cell vehicles will make 40% of group sales in Europe, 15% of North American sales, and 10% of sales in Japan.

Separately, during the Shanghai International Automobile Industry Exhibition in April, Toyota said it would launch 15 EV models by 2025, including one jointly developed with compatriot Subaru Corporation FUJHY that is to be released next year. Overall, Toyota's spending on batteries that power EVs are set to double compared to last fiscal year as it should reach about 160 billion yen for the fiscal year that will end in March 2022.

Toyota's plan differs from that of its rivals, including its domestic competitor Honda Motor Co. Ltd HMC. That aims for all its vehicles globally to be fully electric by 2040, rising from 40% aimed for 2030, both globally and in North America.

Toyota's European rival Volkswagen AG VWAGY that sells roughly the same number of vehicles is going even beyond producing electric vehicles as it will invest in as many as six large battery factories and it aims to operate 18,000 public fast-charging stations across Europe by 2025.

Outlook

The semiconductor crisis is deepening along with a resurgence of Covid-19 cases in Asia where most semiconductor chips are produced. The spread of infections caused by dreadful variants remains unpredictable, all of which make it challenging to maintain operations. Moreover, supply constraints have been exacerbated both by the coronavirus and by natural disasters.

Until recently, Toyota's supply chain know-how and large chip inventory enabled it to successfully overcome the shortages where it simply applied what it learned throughout its history that contained natural disasters. But this is no longer the case as inventory levels are running thin and the global pandemic is still not showing signs of becoming history.

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