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Toyota Is Cutting Car Production Again. It’s Bad News for Inflation.

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A scene from a Toyoya production line in India.

Dhiraj Singh/Bloomberg

Global car production has been hampered for months because of a plethora of supply-chain and logistics issues. Investors and car buyers hoping things will improve will have to wait a little longer.


Toyota Motor

(ticker: TM) cut its production plans again. This time, Covid-19 was the main culprit.

Toyota is taking additional downtime at some plants the week of June 6. The lost production will amount to about 50,000 units. Toyota says it plans to make 800,00 vehicles in June: about 200,000 in Japan and 600,000 overseas.

Just a few days ago, on May 24, the plan was for 850,000 units a month in June, July, and August. “Although it is very difficult to estimate the current supply situation of parts due to the ongoing lockdown in Shanghai, and there is a possibility that the production plan may be lower,” read the May 24 news release.

The possibility became reality on Friday. Covid lockdowns in Shanghai have roiled more than just Toyota’s production plans.


(TSLA) has a plant in the area that is operating at reduced capacity. And


(NIO) was forced to take production downtime recently because of the Shanghai restrictions. NIO’s plant isn’t near Shanghai, but it can’t source parts from closed plants in the region.

It has been a tough year for Toyota production. Earlier in May, Toyota said that production this month would be 700,000 units, down from an expected 750,000 units. That was because of the global semiconductor shortage. In March, an earthquake resulted in another production reduction.

Still, things are getting better, even if slower than expected. Toyota plans to make 9.7 million vehicles in its 2023 fiscal year, which ends in March. It manufactured about 8.6 million vehicles in fiscal 2022, producing 8.2 million in fiscal 2021.

Faster production is needed to help car prices drop. New and used car prices are at or near records, partly because inventories are low.

Like production, car prices are getting better, but at a slower rate than buyers would like. Used-car prices in the U.S. have fallen for three consecutive months. The Manheim index of used vehicle prices, however, is still up about 14% year over year. What’s more, it is about 60% higher than before the pandemic..

High prices for cars play into overall inflation. Overall, consumer prices have risen about 8.2% year over year for the past three months, on average. That’s the highest inflation rate since the early 1980s. As the supply-chain situation improves, helping with car prices, the overall inflation numbers should decline.

Time will tell if car prices will fall enough to help the overall inflation numbers or to help get investors bullish about car stocks again. Toyota stock is down about 11% year to date. Shares of General Motors (GM),

Ford Motor

(F) and Tesla (TSLA) are off about 35% year to date on average, far worse than the 15% and 10%, comparable, respective drops in the

S&P 500

Dow Jones Industrial Average.

Investors are worried that higher inflation and interest rates will cool demand for new cars while hurting profit margins.

Write to Al Root at [email protected]

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