Global chip shortage: Toyota profits fall as production hit

Japanese motor industry giant Toyota saw its profits fall by 21% for the last three months of 2021 as the global chip shortage hit production.

The company said that its third quarter operating profit came in at 784.4bn yen (£5bn; $6.8bn).

The world’s best-selling carmaker also cut its annual production target by 500,000 vehicles to 8.5 million.

It comes as manufacturers around the world are struggling to find enough microprocessors for their products.

“We sincerely apologise for the inconvenience caused to our customers due to the series of production volume reductions since last summer. We are working to restore full production as soon as possible,” Toyota said in a statement.

In September, Toyota slashed its worldwide vehicle production by 40% because of the chip shortage.

The company has also announced a number production suspensions in recent months due to a lack of parts as the pandemic hits supply chains.

Rival carmakers including Volkswagen, General Motors, Ford, Nissan, Daimler, BMW and Renault have also cut vehicle production in recent months.

“The chip shortage will still weigh on Toyota in 2022 but they’ll likely manage any challenges better than their peers,” Tu Le, managing director of Sino Auto Insights told the BBC.

“I think they actually see opportunity in crisis because of their confidence in managing the shortages better than GM and VW. So relatively, I see Toyota having a strong year relative to their competitors,” he added.

Last month, Toyota cemented its position as the world’s biggest car seller as it widened its lead over nearest rival VW.

Separately, in January Toyota warned customers in Japan that they would have to wait for up to four years to take delivery of its new Land Cruiser SUV.

The firm said the delay was not related to the global chip shortage or the supply chain crisis.

The pandemic saw a surge in demand for consumer electronics and medical devices, which all contain computer chips.

That meant there weren’t enough semiconductors left for carmakers.

When the global chip shortage first hit the motor industry early last year Toyota was relatively well prepared compared to its rivals.

It had faced a similar issue in the wake of an earthquake and tsunami a decade earlier.

Back then, chip-making factories were damaged, which meant major production disruptions for Toyota and other carmakers.

Toyota reviewed its supply chain and started stockpiling. That meant it had enough semiconductors to last for months.

But as the pandemic dragged on, those stocks are running low and the company now expects to miss its global production target.

And analysts predict the chip shortage could last until next year.

There is some good news though. In recent months, there have been major investments in plants specifically to manufacture chips for the motor industry. Before the pandemic that hadn’t been seen as a priority.

Chipmakers are now battling to win customers in the auto sector after the semiconductor shortage highlighted the size of the market, especially as the growing electric vehicle (EV) industry calls for even more advanced technology.

When it comes to EVs, Toyota is trailing many of its rivals after having long-focussed on hybrids.

While hybrids are still more popular in emerging markets, demand for EVs is growing in the larger economies of the US, China and Europe.

So along with overcoming the chip shortage, Toyota also needs to catch up with its rivals in the EV market if it wants to retain its title as the world’s best-selling car maker.

Source: BBC