Japan’s Toyota targets record ’23 car output of 10.6m units, with caveat

SINGAPORE (ICIS)–Global automotive giant Toyota is targeting to produce 10.6m units in 2023, subject to a possible downward adjustment of 10% if problems with supply of semiconductors persist.

• Jan-Nov 2022 car output at 8.3m units
• Uncertainty over chip shortage remains
• High inflation, interest rates hurt Japan car sales prospects

The number was set as a “baseline production volume with a downward risk fluctuation range of approximately 10%”, Toyota said on 16 January.

The automotive industry is a major global consumer of petrochemicals, which account for more than a third of raw material costs of an average vehicle.

“The situation this year remains difficult to predict due to factors such as semiconductor shortages and the spread of COVID-19,” the company said.

“However, we will continue to carefully examine parts supplies and supplier situations to create more stable production plans and reduce supplier burdens, while considering all possible production fluctuation measures to ensure that we can deliver as many vehicles as possible to our customers at the earliest date,” it added.

Toyota posted its highest annual output in 2019, having produced 9.1m units, before the coronavirus pandemic took a heavy toll on global automotive production and sales.

For January-November 2022, its car production stood at 8.3m units.

The global manufacturing sector suffered heavy blows in 2020 due to a severe shortage of semiconductors following massive supply disruptions caused by the coronavirus pandemic.

In that year, Toyota’s car production declined 12.6%, while sales had a 10.5% fall and exports posted a 16.9% contraction, based on data available on the company’s website.

Japan’s overall car production is expected to stage a recovery in 2023 after shrinking for three consecutive years, providing some lift to the world’s third-biggest economy.

The automotive sector has a sizeable share in Japan’s overall industrial output and accounts for about a fifth of its total annual exports.

But export growth may be hampered this year amid an expected weakening of the global economy amid high inflation and interest rates.

The US and major economies in Europe are facing strong recessionary headwinds in 2023 after aggressively hiking interest rates to combat inflation.

The world economy is projected to grow at a much slower pace of 1.7% this year, from a 2.9% forecast expansion for 2022, according to the World Bank.

Japan had successfully resisted the global pressure to hike interest rates last year despite the sharp depreciation of the yen.

On Wednesday, the Bank of Japan (BoJ) maintained its key interest rate at minus 0.1% against expectations of a follow-through measure to an effective monetary tightening in December.

The central bank shocked markets late last month when it raised the upper limit of its yield curve control band for 10-year bonds to 0.5% from zero,  fueling expectations that further monetary tightening is in the cards.

Focus article by Pearl Bantillo

Thumbnail image: At Toyota’s Tsutsumi Plant near Nagoya in central Japan – 8 December 2017. (Source: Aflo/Shutterstock)

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