Honda's production capacity will be cut by about 4000 vehicles this month because of a shortage of automotive chips.

Honda is preparing to cut production because of a shortage of car chips, which is expected to first cut about 4000 cars in January.

Honda's cuts are likely to be even bigger later this year, according to people familiar with the matter: "from February, the situation is likely to become more and more serious. In the first quarter, in Japan alone, a shortage of car chips could affect the manufacture of thousands of cars. "

Due to the impact of novel coronavirus's epidemic, a large number of business people choose to work from home, resulting in a surge in demand for smartphones and PC chips. The influx of chipmakers into the field has led to a shortage of chips supplied to auto parts makers.

Honda CIVIC2020 version (@ carwale)

Last October, Asahi Kasei (AsahiKASEI) 's chip factory in Miyazaki Prefecture, Japan, was hit by a fire, which severely affected the manufacture of audio module chips, but it had nothing to do with Honda's production cuts.

"at present, we have made sure that there is an adequate inventory of relevant parts," said a Honda press officer. "

Honda is widely expected to limit the number of vehicles it can produce per day. In fiscal year 2019, global automakers cut production by a total of 4000 vehicles, accounting for less than 0.1 per cent of the world's 4.77 million vehicles.

It takes at least three months to purchase raw materials to mass-produce chips, so it is an arduous task for automakers to quickly adjust production according to demand. The epidemic has led to a decline in car demand in the first half of 2020. At that time, carmakers temporarily cut chip orders, and chip suppliers changed their production plans accordingly.

Last summer, the car market rebounded, especially in China, but the production capacity of car chips has been unable to keep up.

As countries around the world adopt economic stimulus measures and people buy cars to avoid taking public transport to reduce the risk of infection, "the car market has recovered faster than expected from the epidemic crisis," said (Masashi Okada) Okada, an analyst at consulting firm Arthur D. Little Japan.

Honda has been optimizing its production lines around the world in recent years, such as closing production plants in Argentina and the Philippines, and merging some production lines in India. Honda's assembly plant in Swindon, UK, will also be closed this year.

In November, global car production rose 11.4 per cent year-on-year to 457671. In Japan alone, production increased by 22.5% to 64843 vehicles.

But the knock-on negative effects of the epidemic forced Honda to cut production.

"the strong demand for smartphones, 5G base stations, games and other products has led the chip market to move closer in this direction, so the production capacity of automotive chips is limited," said (Kazuhiro Sugiyama) Sugiyama, an analyst at Omdia, a well-known semiconductor consulting firm. " And the surge in demand for electric cars in China has exacerbated the supply crunch.

In Germany, Volkswagen also announced production cuts at its Chinese plant last month because of a shortage of chips. Auto parts suppliers Continental and Bosch have admitted that some parts have to be delayed for the same reason.