Toyota beats GM in Q2 U.S. sales, but it's not 'sustainable'

Toyota's first-ever quarterly besting of General Motors in sales might be repeatable, but it isn't sustainable for the Japanese automaker, says Bob Carter, head of sales for Toyota Motor North America.

In the second quarter, Toyota narrowly outsold GM on the domestic automaker's home turf — 688,812 to 683,696 — in a second quarter defined by inventory woes and supply disruptions amid strong demand in a fast-growing economy.

"I think that it's not a sustainable position, to be perfectly frank, and that's not a stated goal," Carter told reporters on a video conference call last week. "We have our plans; we work our plans. I think it's an acknowledgment, though, to our teams largely in Ann Arbor in purchasing and R&D that have enabled us to, frankly, maneuver not only through the semiconductors situation, but the supply chain disruptions everywhere within the industry."

Carter said those teams have been "masterful in the way that they've managed supply chains, and the demand is there for the entire industry. The ones who can [mitigate] these supply chain disruptions the best are tending to produce the results. But clearly, to be frank with you, this is a moment in time. As supply chains stabilize for everyone, I think we'll go back to more historical share."

Carter's comments came as he and fellow Toyota executive Chris Reynolds detailed the struggles the Japanese automaker and the rest of the industry are enduring to meet exceptionally strong consumer retail demand amid production disruptions.

J.D. Power and LMC Automotive estimated last week that U.S. dealerships had 932,000 vehicles in stock for retail sale, compared with 3.1 million two years ago. Carter said Toyota and Lexus dealers began July with just 38,000 vehicles in inventory, about a seven-day supply.

Carter said consumer retail demand was the strongest he had ever seen, and he predicted that tight inventories might last almost a year more.

"It will take a little time — maybe into the second quarter of 2022 — before we see inventories start to stabilize to match demand again," Carter said, adding that consumer demand will likely remain robust at least three or four more months.

Toyota is keeping a close watch on surging COVID-19 cases, which could further threaten production, said Reynolds, executive vice president of corporate resources, including human resources, for Toyota Motor North America.

Toyota hasn't had any confirmed COVID-19 cases over the past several weeks and was moving ahead to allow employees who have been vaccinated to go maskless if they follow internal protocols.

But Reynolds cautioned that could change rapidly.

"We thought things were starting to turn for the better, but this is affecting everybody, Toyota included," Reynolds said. "It goes to show that you can never let your guard down, and things are subject to change. It's the virus that runs the show here; I wish we did."

With dealer stocks at historic lows, Carter said consumers have shown an uncharacteristic willingness to put deposits on vehicles far up the ordering pipeline and wait for their arrival.

"We're seeing trucks coming into our dealers carrying nine vehicles, and eight of them have consumer deposits on them," Carter said. "Preselling is becoming a very, very big part of the industry. Consumers' preference is still to have every color available to them side by side on the lot, but that's not the situation we're in right now."