Source | Globe Magazine
Text | Xu Changqing
Under the superposition of the repeated new crown pneumonia epidemic and chip shortage, the global automotive industry supply chain is once again facing a severe test. Toyota Motor Corporation (hereinafter referred to as "Toyota") recently announced that several of its plants in Japan will stop production for several days in May due to "insufficient supply of parts due to the spread of the epidemic."
At present, when the division of production is highly globalized, the industrial chain and supply chain of all countries in the world are interlinked and highly dependent on each other, especially in the automotive, electronics and other industries not only have high product complexity, but also have long industrial chains and high levels of internationalization. As some people in the automotive industry have said: "One part is one part, and the car cannot be produced." ”
Toyota's supply chain management system, which Toyota has always been proud of, has not been able to withstand the impact of the "black swan" of the epidemic. What will be the solution to the safety and stability of the automotive industry supply chain?
▲ On June 29, 2020, pedestrians walked under a Toyota Motor Company sign in Tokyo, Japan. Photo by Xinhua News Agency reporter Du Xiaoyi
Forced to cut production
According to overseas media reports, the Toyota shutdown involves 10 production lines at 9 plants, which will affect Corolla, C-HR, RAV4, Lexus LS, IS, RC, NX, CT, UX and other models, and the shutdown time will range from 1 to 6 days. Based on this, Toyota said that its global sales in May will be 750,000 units, down 100,000 units from the previous forecast, of which 200,000 units in Japan and 550,000 units overseas.
This is not the first time that Toyota's local plant has stopped production since the COVID-19 pandemic.
As early as March 2020, Toyota announced that seven production lines at five plants in Japan would be suspended for a period of time from April 3 of that year due to the reduction in global orders and the decline in demand due to the spread of the new crown pneumonia epidemic. This is the first time that Toyota's production adjustments in China have been stopped due to the epidemic.
In August 2021, Toyota issued a statement saying that due to the epidemic and the shortage of chip supply, vehicle production in September will be reduced by 40% from the original plan, but the annual production target will remain unchanged.
One of the reasons for Toyota's chip shortage is that malaysia has gone wrong. Malaysia, which has become a major center for chip testing and packaging in recent years, has been unable to open a number of factories due to the epidemic. Toyota's chip supplier STMicroelectronics (ST) plant in Muar, Malaysia, has been shut down three times since July 13, 2021, directly resulting in a shortage of its associated Tier 1 suppliers and preventing Toyota's reserve chips from keeping up with consumption levels.
Also in August last year, workers at several wire harness assembly plants in Vietnam were diagnosed with COVID-19, leading to plant shutdowns, including Toyota's key suppliers. The wiring harness is the most basic component that connects the internal cable of the car, and its importance to the automobile manufacturing is self-evident.
According to media statistics, since July 2021, Toyota has stopped production at its factory every month. In fact, Toyota is not the only Japanese car company affected by the rupture of the supply chain in Southeast Asia. In addition to Toyota, Japanese car companies such as Honda Motor Company and Nissan Motor Company have also laid out a large number of production capacities in Southeast Asia. Singapore's Lianhe Zaobao once reported that 30% of the parts of Japanese auto companies come from suppliers from Southeast Asian countries. Taking the wiring harness as an example, data from the Japan External Trade Organization (JETRO) shows that Vietnam is The largest source of wire harness imports in Japan, accounting for about 40% in 2020.
Supply chain vulnerabilities
Since the 1960s, improving the competitiveness of the domestic automobile industry and achieving industrial upgrading have been the development goals of the newly industrialized countries in Southeast Asia. Although Southeast Asian countries currently lack internationally competitive automotive independent brands, the production and supply of auto parts is undoubtedly its contribution to the global automotive industry chain.
In order to ensure the stability of the supply chain, the Japanese government has been pushing Japanese companies to adopt the "China +1" model and seek to establish production bases outside Of China. Taking advantage of cost-competitive production in Southeast Asia, Japanese car brands such as Toyota have established complex supply networks here. Thailand, for example, is one of the manufacturing hubs of Toyota, Honda, Nissan and Mitsubishi Motors, which account for about 50 percent of Thailand's total car production capacity and source parts from neighboring countries such as Vietnam and Malaysia.
According to a report released by the ASEAN-Japan Center in January 2020, Japan invested around $898 million in the region's automotive industry. In October 2021, Japan's Yomiuri Shimbun reported that major Japanese automakers will cut production by about 1.3 million vehicles due to the epidemic in Southeast Asia.
Analysts believe that the large-scale production cuts of Japanese car companies are mainly due to loopholes in their supply chains. The first loophole is the globalization and decentralization of parts procurement. Takashi Horii, Asia director at automotive research firm Fourin, said: "The supply of most parts in Southeast Asia forms an interdependent network, and if there is a problem with a country's parts supply, it will affect the entire supply chain. ”
The second loophole is the production method driven by orders and demand. For example, Toyota's concept of "producing the necessary products only when necessary, in the necessary quantities", although it controls the cost to a large extent, but when subjected to external shocks, Toyota's carefully built ecosystem will quickly expose its vulnerability.
Or will be refactored
In view of the supply chain crisis, seeking alternative materials, realizing local production of parts, diversifying supply chains and inventory reserves in advance have become the choice of Japanese car companies.
Toyota has realized that the production cycle of key parts of the car is too long to cope with the impact of devastating shocks such as natural disasters, so it has decided to regularly stock up on key parts of the car and propose a "business continuity plan" that requires suppliers to reserve chips for Toyota for 2 to 6 months.
In addition to vehicle companies, in the local production of parts, a major Japanese auto parts manufacturer said that it hopes to reform its supply chain management methods to avoid becoming a production "bottleneck". Others have abandoned the previous "just-in-time" approach to operation. The head of automatic transmission maker Jatco said in an interview that the company is working to ensure it always has enough chips and other critical components by placing orders earlier than usual and signing contracts with suppliers.
In addition, Japan's auto parts supply chain is also accelerating its shift to China. For example, in recent years, Toyota has gradually put the production of core components such as transmissions for hybrid vehicles into the Changshu production base in Jiangsu Province, and Toyota's parts supplier Aisin Seiki has also continued to expand its business in China.
Even so, the outlook is still not optimistic. Curtis, a global economist at Capital Economics, a British economic research firm, said the auto industry could benefit from the lifting of covid-19 restrictions in Vietnam and Malaysia this year, "but even so, the imbalance between supply and demand of chips means that shortages will continue".