Home » Private Sector » Toyota cuts output target amid chip crunch as profit fall 25%

Private Sector

Toyota cuts output target amid chip crunch as profit fall 25%


Toyota cuts output target

As the Japanese company struggles with rising material costs and a persistent chip shortage, Toyota Motor Corp. on Tuesday reported a worse-than-anticipated 25% decline in quarterly profit and lowered its annual output target.

The largest automaker in the world by sales also issued a warning, highlighting the severity of the business challenges it is currently facing, that it is still difficult to foresee the future.


Toyota performed better in managing supply chains during the coronavirus epidemic than the majority of automakers, but it was harmed by the ongoing chip scarcity this year, repeatedly lowering monthly output objectives.

Kazunari Kumakura, head of Toyota’s purchasing group, stated, “We’re out of the hardest period, but… it’s not always a position where we’re fully supplied.” “I have no idea when the chip shortage will end.”

As a result of chipmakers prioritising supplies for electronics products like smartphones and computers while natural disasters, COVID lockdowns, and industrial disruptions have hampered a recovery in car chip supply, Kumakura claimed that there is still a global shortage of auto chips.

Additionally, he predicted that there would continue to be a shortage of older semiconductor types, which currently draw little investment.

In the midst of the doom, Toyota stock ended the day down 1.9%, while the Nikkei average rose 0.3%.


Some observers felt the result was underwhelming, claiming that other favourable aspects outside the chip shortage ought to have given it a lift.

According to Koji Endo, an analyst at SBI Securities, “the yen is weaker in the second quarter, the volume in the second quarter is significantly larger than in the first quarter, and the (COVID) shutdown in China does not affect (the volume in the second quarter).”

In light of these factors, the second quarter’s total earnings must have exceeded the first quarter’s, which is quite disappointing.

Toyota stated that it now anticipates producing 9.2 million vehicles during the current fiscal year, down from the previously anticipated 9.7 million but still above the output of roughly 8.6 million units during the previous fiscal year.

According to Reuters, Toyota notified numerous suppliers last month that it had set a global goal of 9.5 million vehicles for the current fiscal year and hinted that the prediction would be decreased depending on the availability of electromagnetic steel sheets.


The value of sales made abroad has increased as a result of the yen’s 30% decline this year against the dollar, but this benefit has been counterbalanced by rising input prices.

In the first half of this fiscal year, the weak yen increased profit by 565 billion yen, but the advantage was more than offset by a 765 billion yen increase in material prices, with the low local currency further driving up import expenses, according to Toyota.

Toyota maintained its cautious profit outlook, maintaining its full-year operating forecast of 2.4 trillion yen for the fiscal year through March 31. This figure is significantly lower than the average forecast of 3.0 trillion yen made by analysts.

In contrast, Hyundai Motor of South Korea increased its forecast for revenue and profit margin last month to account for a rise in foreign exchange rates.

For its hybrid gasoline-electric models, Toyota was once a favourite of environmentalists. However, its slow transition to fully electric vehicles has drawn criticism from green investors and activists (EV).