Toyota production drops again in July, putting annual target in doubt

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Toyota Motor Corp said on Tuesday its July global vehicle production had fallen 8.6% year-on-year, missing its target for the fourth straight month, as COVID outbreaks, severe weather and a recall probe on top of a persistent chip shortage hurt output.

The sustained weakness in overall performance in July from the world’s largest automaker by sales has raised concerns that Toyota may have to lower its annual production target of 9.7 million vehicles, even as China dials back pandemic restrictions and chip shortages are showing some signs of easing.

Toyota produced 706,547 vehicles worldwide last month, below its target of around 800,000 units and the year-earlier output of 773,135.

Production in the first four months of the current fiscal year, which began in April, has fallen 10.3% short of its initial plan.

The global auto industry has weathered supply chain disruptions caused by chip shortages and China’s strict COVID restrictions, but Toyota has also been dealing with heavy rain in Japan, a production line halt due to a recall investigation, and coronavirus outbreaks at a local plant.

Toyota said domestic production had tumbled 28.2%, outweighing record July overseas production, up 4.5%, driven by a strong recovery in Europe, China and the rest of Asia.

“In August this year, Toyota is planning to produce about 700,000 vehicles, and considering it made about 530,000 in August last year, I think the situation is starting to improve,” said Seiji Sugiura, senior analyst at Tokai Tokyo Research Institute.

Eager to make a strong comeback, the company said earlier this month it would hold to its annual production target as it planned to raise output through November, depending on supplies of parts and personnel. It expects September production to rebound to around 850,000 vehicles, a record for the month.

Still, Sugiura said Toyota was not out of the woods yet, citing uncertainty over stable chips procurement as a risk and expressing scepticism the company could stick to the 9.7 million production goal.

“In terms of recovery from the situation in the first half of the year, I believe that in the second half of the year, the company will probably set the monthly production level at 800,000 or 850,000 units a month. If production exceeds 800,000 units in a single month, that will be a record,” he said.

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