In a bad year for automakers, Toyota Motor capped 2021 with a historic victory: For the first time ever, the Japanese automaker became the No. 1 car seller in the U.S., knocking General Motors off from the top spot it’s held since 1931. Toyota sold 2.3 million vehicles in the U.S. last year, edging out GM’s 2.2 million units.
“Toyota is grateful to our loyal customers for putting their safety and trust in Toyota and Lexus vehicles. Being number one is never a focus or priority,” Toyota said in a statement. “The company’s focus has always been—and will continue to be—on being the best brand in terms of safety and quality in customers’ minds.”
Toyota might well be a safe, quality brand in the mind of customers, but the Japanese manufacturer had another advantage over its U.S. rivals in 2021: Toyota’s cars were more available.
Last year, automakers worldwide suffered production losses due to a crippling shortage of semiconductors—chips that are vital for a car’s onboard computers. As chip supplies dwindled, carmakers were forced to scale back production. Consultancy AlixPartners estimates the chip shortage cost automakers $210 billion in forgone sales last year.
GM first warned of shortages in January last year and cut production of its cars by 278,000 units by May—nearly 40% of its total capacity—as it struggled to source semiconductors. Toyota, on the other hand, kept its U.S. production lines running at close to 90% of capacity through June.
Toyota’s success in delaying the effects of the chip shortage is testament to the brand’s superior supply-chain management. Unlike other car brands, Toyota keeps a months-long stockpile of semiconductors on its books to prepare against black swan events. Automakers don’t like to stockpile components because excess inventory eats into their profit margins.
Toyota learned the importance of stockpiling the hard way 10 years ago, when the Fukushima disaster knocked many of its suppliers offline and left the automaker suddenly short on vital components. In the aftermath of the 2011 earthquake, Toyota also began building better relationships with the manufacturers in its supply chain so that if disaster struck again, Toyota could respond quickly.
When the pandemic began in 2020 and led to a chip shortage in 2021, Toyota already had the tools in place to respond while U.S. manufacturers, like GM, were less prepared. Toyota’s U.S. sales outstripped GM’s for the first time in the second quarter last year, and the Japanese brand has lead its U.S. rival since.
However, GM North America president Steve Carlisle says he’s confident that the American automaker can reclaim its top spot in the year ahead. “In 2022, we plan to take advantage of the strong economy and anticipated improved semiconductor supplies to grow our sales and share,” Carlisle said.
Most analysts expect the chip shortage to resolve itself by the end of the year—possibly transitioning into a chip glut by 2024. Many automakers, including GM, have begun implementing Toyota’s best practices when it comes to supply-chain management.
In September, GM CEO Mary Barra said the automaker would begin striking direct relationships—and might even launch joint ventures—with semiconductor manufacturers to ensure a consistent supply of chips in the future.
Now that Toyota has proven the success of its model, it may be hard for the Japanese brand to ward off imitators.
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