automatically save custom post type title as a category

Hook into save_post, and check if the category already exists (to avoid double creation on post edit). If category doesn’t exist create it using wp_insert_term and assign to post using wp_set_object_terms

add_action('save_post', 'add_title_as_category');

function add_title_as_category( $postid ) {
  if ( defined('DOING_AUTOSAVE') && DOING_AUTOSAVE ) return;
  $post = get_post($postid);
  if ( $post->post_type == 'post') { // change 'post' to any cpt you want to target
    $term = get_term_by('slug', $post->post_name, 'category');
    if ( empty($term) ) {
      $add = wp_insert_term( $post->post_title, 'category', array('slug'=> $post->post_name) );
      if ( is_array($add) && isset($add['term_id']) ) {
        wp_set_object_terms($postid, $add['term_id'], 'category', true );
      }
    }
  }
}

If you want to set a custom taxonomy instead of the standard category replace 'category' with the custom taxonomy name everywhereit appear in code above.