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What's going on?

Toyota said on Wednesday it’s expecting to make half a million fewer cars than planned this quarter, as the electric vehicle (EV) novice struggles to leave the good old days behind.

What does this mean?

It’s hard to be a carmaker these days: the chip shortage and rising cost of materials is still hindering production, and Toyota – which reported its quarterly results on Wednesday – is feeling the pain. The company reported a 6% drop in profit last quarter compared to the same time in 2020 – which, in fairness, was better than analysts were expecting.

But that’s where the good news ends: Toyota reckons chips will be in short supply for a while still, and admitted that it might hurt production in the future. In fact, the company reckons it’ll make as many as 480,000 fewer cars than planned this quarter. It’ll cut costs to offset some of that shortfall, sure, but its profit outlook for its full financial year still missed expectations.

Why should I care?

Zooming in: Toyota’s late to the party.
Even with this drop-off in production, Toyota still managed to sell 10% more cars in 2021 than it did in 2020, earning it the title of the world’s biggest carmaker for the second-straight year. But it might struggle to hold onto that accolade: the company’s been slow to develop EVs, which last year made up just 1% of Toyota’s total sales even as sales of EVs themselves doubled in size. But it’s finally taking note: the carmaker announced in December that it’s planning to invest $35 billion into battery-powered EVs.

The bigger picture: Fool Europe once…
The chip shortage is crippling Japanese and European carmakers alike, which might be why the European Union (EU) announced this week that it’s planning to invest $50 billion into its chip industry by 2030 – part of a plan to quadruple chip production and double its share of the market in the same timeframe.

Originally posted as part of the Finimize daily email.

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