Parts shortages, COVID-19 cases leading to reduced auto production

Shortages of parts and other key components along with the COVID-19 pandemic have drastically reduced auto production among major Japanese companies, including Toyota Motor Corp. and Honda Motor Co.

One estimate placed the total expected economic loss at over 1,000 billion yen ($ 9 billion).

Shortages of semiconductors used in automobiles since the start of this year have resulted in lower production among automakers. Delays in the production of other auto parts at factories in Southeast Asian countries from this summer have exacerbated the problem.

Cases of COVID-19 have erupted among workers at these factories, causing production delays.

At the end of August, the total decline in auto production among Japanese companies stood at around 930,000 vehicles, but that figure more than doubled to around 1.7 million vehicles in September. This represents around 7% of the total number of cars produced by major Japanese companies in 2020.

Initially, industry officials believed the drop in production would only be a temporary problem, but difficulties in obtaining auto parts continued.

Some companies had to shut down production at some factories in September, forcing potential customers to wait longer before buying a car.

Toyota will reduce planned production in September and October by 760,000 units combined. At one point, all Toyota factories in Japan halted production.

The suspension means Toyota has been forced to cut total global production plans this fiscal year from 9.3 million vehicles to around 9 million.

Honda also cut its expected production in August and September by 60 percent and the estimate for early October is a 30 percent reduction. As a result, the planned total worldwide sales target has been reduced from 150,000 to 4.85 million vehicles.

A major problem for automakers is the reduced production of wire harnesses which are considered the nervous and circulatory systems of cars as they connect the electronic parts of the vehicle. In addition to being time consuming, production cannot easily be transferred to other factories.

This means that it will take some time before the production of wire harnesses returns to normal.

The Daiwa Research Institute has calculated that as part of the current reduction in auto production, the real gross domestic product for fiscal year 2021 will be reduced by 300 billion to 600 billion yen. Adding in the effects of sectors other than the auto industry, the total economic loss is estimated at 1.2 trillion yen.

(This article was written by Junichi Kamiyama and Naoyuki Fukuda.)

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