For the first time ever, a foreign car company became the number one automaker in America in 2021.
Toyota outsold General Motors, which had been the top-selling carmaker since 1931. Toyota sold 2.3 million vehicles in 2021, increasing their sales by 10% from 2020; at GM, sales dropped by 13% from 2020.
One of the contributing factors to the end of GM’s reign atop the car market was issues in the supply chain that led to semiconductor chip shortages. Here’s what happened over the year that led to Toyota’s ascension to the number one carmaker in the U.S. — and implications the company’s strategy has for the auto market in the future.
The Auto Market in 2021
Many industries have been disrupted as a result of the COVID-19 pandemic and the auto industry was no different. However, some experts see pandemic-related supply chain issues as a detour for the long-term changes taking place across the auto industry.
Consumer demand for electric cars is one trend shifting the dynamic of the auto market. Many companies are spending billions to
design battery-powered cars and the manufacturing plants that can produce these models. Most automakers are a long way off from competing with Tesla, but nevertheless, have prioritized spending with this goal in mind.
Toyota’s Prius, a hybrid vehicle, is the
dominant model in this category, though Toyota is considered behind in the race to launch a fully-electric car. GM, on the other hand, was forced to suspend its manufacturing of the Chevrolet Bolt, its main electric vehicle, because of a battery issue.
Gaining market share in the electric vehicle category was among the top priorities for both GM and Toyota until the pandemic started. But COVID-19 changed the dynamic significantly, causing a semiconductor chip shortage that reverberated for automakers worldwide.
Causes of the Semiconductor Chip Shortage
There were a number of factors that contributed to the semiconductor chip shortage. First,
demand spiked for cars following the pandemic, an unexpected outcome for which many automakers were not prepared. This was followed by a series of unfortunate events that few could have predicted.
“A freak cold snap in Texas in February shut down factories at top chipmakers. Drought in Taiwan around the same time threatened to dry up the island’s semiconductor supplies (since chipmaking requires pools of water to wash away industrial chemicals),” wrote
Fortune. “Then, in March, a fire tore through a factory at Japan’s Renesas — a key chip supplier for the industry.”
Ultimately, this forced GM, Ford, and European carmakers to slash production dramatically. By one estimate, the global car market lost about 4% of total sales in 2021 —
roughly $110 billion in revenue.
Toyota, however, was less impacted than GM and other carmakers. This was because the brand learned from the
2011 Tohoku earthquake, during which the company struggled for about six months to recover. To prevent future downtime, Toyota designed a new strategy.
“The automaker came up with a list of about 1,500 parts it deemed necessary to secure alternatives for or to stockpile. The company also put in place an intricate system to monitor the vast network of suppliers that produce those items—and the smaller companies those suppliers buy materials from—to develop an early-warning system for shortages,” reported
Bloomberg.
This strategy allowed Toyota to stabilize production and carefully manage its supply chains, ultimately beating out GM for the top spot in 2021.
The Future for Toyota and GM
Though Toyota may be on top for the moment, the company itself doesn’t expect to dominate for long. “Yes, we did surpass General Motors in sales,” said
Jack Hollis, Toyota North America’s senior vice president of automotive operations. “But to be clear, that is not our goal, nor do we see it as sustainable.”
As the global economy and supply chain recovers, GM is likely to turn its attention back to fixing the flaws of its electric vehicle. The company has announced its goal to produce only electric vehicles by
2035. If anything, GM’s sales results in 2021 prove that GM should focus not only on creating new technology but also on shoring up supplies of the technology it needs for its existing products.
