unsold cars left.jpgBack in May, the blog suggested that “Chrysler’s bankruptcy marks a ‘tipping point’, when the first major company is finally forced to adjust to a permanently lower level of demand.” Now comes news that Toyota is to follow Chrysler’s lead, and will cut production on a global basis
Toyota produced 9.24m autos last year, but only expects to make around 7m this year. Reports now suggest it is considering cutbacks of between 0.7m – 1m in its total capacity, including the closure of a 220,000 plant in Japan. This is in spite of the support provided by the various auto scrappage schemes, which have increased demand for Toyota’s fuel-efficient vehicles.
History provides little evidence as to what happens after scrappage schemes end, as they have not been tried before on a major scale. But actions tell their own story. If a relatively successful company such as Toyota is cutting capacity, it suggests little confidence in a quick recovery to previous demand levels.