At a Glance:
- The global chip shortage benefited Toyota and Honda.
- Toyota and Honda are lowering their production due to supply chain disruptions.
- Toyota’s profit margin surpassed the estimated numbers.
Despite the global chip shortage, the Japanese automakers, Toyota Motor and Honda Motor have delivered profit prospects. The tight vehicle supplies have led to increased consumer demand thus surging the charges for their vehicles. Toyota and Honda also benefitted from weaker yen that further raised the yen value of their overseas earnings.
Toyota & Honda prosper in supply shortage
The COVID-19 has caused supply chain disruption all around the world. Several carmakers like Toyota and Honda are cutting output because of the global shortage of semiconductors. This disruption and shortage of semiconductors with rising competition from other industries has put the automobile industry in a tough spot.
However, the silver lining for Toyota and Honda is that due to lower production the customers are willing to buy cars with fewer financial incentives.
Honda’s Senior Managing Executive Officer, Kohei Takeuchi commented, “We are seeing a further 10% reduction in incentives in North America during the second half of the business year after they halved to $1,000 earlier.”
Profit forecast for Japan carmakers
Honda has upgraded the operating profit forecast for the year to March 31 by 21% to 800 billion yen, whereas, Toyota has reported a full-year profit forecast of 2.8 trillion yen. The supply chain disruptions and chip shortages will keep affecting the production thus prompting the companies to cut costs in a bid to acquire more profit per vehicle.
There is still uncertainty surrounding the course of the pandemic and there can be an expected imbalance in chip supplies. These circumstances will affect the coming business year too.
Toyota has reportedly reduced its annual production target by half a million more to 8.5 million vehicles. On the other hand, Honda has made no changes in the target but has reported lower production of 4.85 than the set target of 4.2 million at the start of the business year.
