Automakers are running out of microchips, which are essential components in every electronic device. Toyota, the largest carmaker in the world, is set to cut its vehicle production by 40% in September. Initially, they had planned to produce almost 900,000 cars next month, but have now reduced that to 540,000 vehicles. Volkswagen, the world’s second-biggest car producer, has announced it may also be forced to slash output further. The high demand for devices that use chips such as game consoles and laptops is one of the key drivers of the shortage.

Toyota is expected to make some cuts in August at its plants in Japan and other sites. The majority of the cuts (360,000) will come in September and will affect factories in Asia and the US. The global ship shortage is also causing problems to other sectors. Apple had to delay the release of its iPhones, while Xbox and Playstation consoles failed to meet the demand. According to Pat Gelsinger, the CEO of chipmaker Intel, the shortage would worsen in the “second half of this year” and it would take “a year or two” before supplies returned to normal. In light of the chip crisis, US President Joe Biden signed an official order to address the issue. He pledged to seek $37bn in funding for legislation to increase chip manufacturing in the US. Toyota saw a 4.4% decrease in shares on August 19, 2021, their biggest daily drop since December 2018. The goal for the company is to make up for any lost bulk by the end of 2021.