As part of Toyota Motor Corp.'s first major round of global production cuts since the semiconductor shortage began, North American factories alone will lose up to 170,000 vehicles through September because of the raging COVID-19 pandemic and ongoing supplier disruptions.
This puts more pressure on U.S. dealers who have been enjoying strong sales momentum this year despite historically low inventories. Through July, the automaker's U.S. sales have advanced 43 per cent.
Toyota Motor North America said Thursday that the region's losses in August are expected to range between 60,000 and 90,000 vehicles. In a separate announcement earlier in the day by the parent company in Japan, it expects September output in North America to drop by 80,000 vehicles.
The steep cuts in August output will impact all of Toyota's assembly plants in the U.S., Mexico and Canada except for its San Antonio factory, which produces the Tacoma and is preparing to launch the next-generation Tundra.
Globally, the Japanese automaker said that it expects to lose 360,000 vehicles, about 40 per cent of its production, in September. Besides North America, the plans will impact Japan, China, other regions in Asia and Europe.
The cutbacks at Toyota's plants are the latest sign that the chip shortage will hang over the industry well into the second half of the year.
"Due to COVID-19 and unexpected events with our supply chain, Toyota is experiencing additional shortages that will affect production at most of our North American plants," Toyota Motor North America said in a statement shared with Automotive News. "While the situation remains fluid and complex, our manufacturing and supply chain teams have worked diligently to develop countermeasures to minimize the impact on production. ... We do not anticipate any impact to employment at this time."
Toyota and Lexus dealers, who have been getting by for months working with some of the leanest inventories in an industry at historically low inventory levels, are about to see even that trickle of vehicles dry up.
In an email to U.S. dealers Tuesday from Southeast Toyota Distributors, the automaker's largest U.S. distributor, that was shared with Automotive News, the distributor counseled dealers to grab any available inventory they could without delay. Southeast Toyota distributes Toyota vehicles to 175 dealerships across Florida, Georgia, Alabama and the Carolinas.
"Due to the uncertainty of future production dates, TMNA has provided guidance to exclude North American production weeks from tonight's [mid-month] allocation," the note said. "We will continue to assess the stability of future build weeks and will postpone allocating unbuilt production until we have a higher level of confidence in the supply chain."
The note goes on to detail a revised allocation pool consisting of just 1,830 vehicles "solely comprised of confirmed [completely built units] production already in transit to our Vehicle Processing Centers."
Toyota Motor North America began August with 139,600 vehicles in dealer inventory or on the way to dealers, with 26,900 of those being Lexus vehicles and the remainder wearing a Toyota badge, according to the Automotive News Research & Data Center. That gave Lexus a 23-day supply and Toyota a 16-day supply of new vehicles to sell.
Toyota Motor North America sold 225,022 new vehicles in the U.S. in July, and 191,841 in August 2020. In the second quarter, it narrowly outsold General Motors on the domestic automaker's home turf — 688,812 to 683,696.