World

Japan’s Toyota, Honda can likely cope with global chip shortage: Fitch

Reuters Tokyo | Updated on February 18, 2021

This file photo shows the process of manufacturing of electronic chips in the X-Fab semiconductors factory in Ormoy, near Paris   -  AFP

The automakers have enough financial flexibility to absorb more costs and maintain significant rating headroom, even if the shortage persists till the second half of 2021

The global semiconductor chip shortage is not likely to significantly affect the financial profiles of Japan’s Toyota Motor Corp or Honda Motor Co, ratings agency Fitch said in a statement on Wednesday.

The automakers have enough financial flexibility to absorb more costs and maintain significant rating headroom, even if the shortage persists till the second half of 2021, according to the statement.

The automobile industry has been grappling with a shortfall in chip supply since the end of last year, driven by coronavirus lockdowns in Southeast Asia and bulk-buying by US sanctions-hit Chinese tech giant Huawei Technologies,among other reasons.

The shortage prompted top US automaker General Motor Co to extend production cuts at three North American plants last week, while Honda Motor and Nissan Motor were set to sell a combined 2,50,000 fewer cars in the current financial year.

Also read: How a global semiconductor shortage is impacting Indian car makers

Meanwhile, Toyota shrugged off the issue in its quarterly report last week and said it has up to a four-month stockpile of chips, with no immediate hit to production expected.

“We believe the shortage should ease or even be resolved in the second half of 2021 as suppliers boost production for automotive clients,” Fitch said.

Top economic and national security officials in the White House have launched a new effort to help the US auto industry fight the chip shortage, a White House official said on Thursday.

The issue could impact nearly 1 million units of global light vehicle production in the first quarter, according to data firm IHS Markit.

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

Published on February 18, 2021
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.