Has Toyota peaked — or is this just the beginning?

Inside the OEM’s unique playbook

Hey, everyone — New data from CDK Global shows that ________ is the most trusted employee when it comes to buying a car.

Did you guess F&I manager? Cause I sure didn’t. 

But it makes sense – customers spend most of their car buying time with the finance managers, who typically have longer tenures than salespeople and bring another level of expertise.

So, kudos to all the F&I managers out there.

—CDG

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Almost every dealer I talk to wants a Toyota store. And the dealers that already have one want another. It’s a cliche at this point, but it’s rooted in reality. Toyota has become the brand everyone is watching — the one setting the pace while others catch up. But how long can that dynamic last?

State of play

The average Toyota dealer’s new car days’ supply is 30 days or less, half of the typical ~60 days. And it’s been that way for years.

Yet, during the massive pandemic-era production shortages, depleted supply slashed the automaker’s market share.

Think about it — for the first time, many lifelong Toyota customers switched to other, more available brands. And there were murmurs about the automaker’s ability to recover.

But as supply returned, so did market share. While the brand hasn’t fully regained the share it lost, the trajectory is overwhelmingly positive.

Why it matters: Today’s lean supply means transaction prices stay tight, with less room for negotiation. Some buyers are even paying markups on Toyotas (wild in this economy), while other brands saturate the market with auto incentives.

The result? Toyota and Lexus lead the U.S. market with nine of the ten fastest-selling cars, according to CarEdge.

Dealer POV: A well-known Toyota dealership leader out West told me he’d love more inventory, especially high-demand hybrids. But he said Toyota isn’t purposefully restraining inventory—its production simply can't match the sales pace.

Big picture: With fewer cars on the lot, every one of them feels like it’s in high demand. And by carefully choosing which models to produce in higher volumes, like the popular RAV4 hybrid, Toyota aligns its limited inventory with consumer preferences — avoiding the traps of overproducing (looking at you, Stellantis 👀).

Key pillar of strength

Toyota’s Production System (TPS) is a masterclass in handling modern supply chain challenges.

Let’s rewind to 2011: After the Tōhoku earthquake, Toyota spotted cracks in its supply chain, particularly around semiconductor chips. The company responded by rethinking lead times and stockpiling key parts ahead of the curve, which put it in a prime position when the global chip shortage hit—while others were left scrambling.

Here’s the deal: Toyota has perfected the balance between keeping stock lean and having safety reserves. Their secret weapon is a system called just-in-time manufacturing. 

  • Instead of building products ahead of demand, they only pull in parts and materials when they need them. 

  • This way, they avoid stockpiling unnecessary inventory, cut costs, and keep production running smoothly. 

  • Plus, it allows them to churn out smaller batches tailored to what’s actually being ordered, which means faster delivery times and less waste.

Check out this chart for a closer look at the TPS system:

At its Georgetown, KY plant, Toyota keeps a tight two-hour window for seat installation, only ordering parts when needed. But in San Antonio, they’ve pushed it even further—slashing lead times to just 20 minutes. With that kind of efficiency, excess stock is practically a thing of the past.

And when it comes to slashing costs, the TNGA-F platform is used across multiple models (Tacoma, 4Runner, Tundra, Sequoia, and Land Cruiser) by sharing frames and architecture — reducing the need for unique parts.

Altogether, you can see why Toyota stays ahead, even during tough times.

An ironclad reputation

Consumer demand is largely built on vehicle reliability and Toyota’s high resale values. 

Basically — when customers buy a Toyota, they know they’re getting a vehicle that will last, and that confidence drives up the resale value. It's not just about the car today—it's about the car five, ten, even twenty years from now. That level of reliability keeps consumers loyal, even in volatile market conditions.

But the number one thing I think what separates Toyota from the competition is the brand’s ability and desire to listen to its dealer body.

What’s the secret behind Ron Bouchard Auto Stores’ salespeople each selling 4-5 more cars each month?

Connected Retail + AI-Powered Financing.

After introducing Upstart’s online and in-store digital retail solutions at their Kia dealership, the group expanded the technology to their Honda, Nissan, and Acura locations.

The real game-changer? The adoption of AI-Powered Financing, which has resulted in faster and more affordable financing options for their customers.

“We’re streamlining the financing process and improving the experience for both our sales managers and customers,” said Chad Bouchard, General Manager at Ron Bouchard Kia and Honda.

Read the full case study here, or schedule a demo with Upstart today.

Toyota understands that a strong dealer-manufacturer partnership means a better customer experience. They listen, act on feedback, and protect dealer profitability with top-notch products, fewer discounts, and a rock-solid finance arm.

The data backs this up: Toyota stores continue to enjoy high dealership valuations with blue-sky multiples between 7x-8x, according to the Q2 Haig Report. Lexus? 8x-10x. Many brands only dream of these kinds of numbers. 

Troubles in paradise

So far this year, Toyota has faced some rare setbacks due to a safety-testing scandal and noticeable recalls.

What happened: Japanese investigators raided Toyota’s headquarters after the company admitted to cheating on certification tests for seven models. Chairman Akio Toyoda publicly apologized for falsifying safety data.

Cause and effect: This led to stop sales and multiple recalls of some best sellers.

Yet, one well-known Toyota dealer told me these actions reinforced Toyota’s reputation for “getting it right.” He said interest in the recalled models after the stop-sales were lifted actually increased. Loyalty like that is hard to come by.

While Toyota has managed to control any fallout in the U.S. markets, its situation in China is a bigger threat.

Quick facts: Profit from Toyota’s China ventures plummeted 73% in the first half of 2024 as the country’s price war carries on.

  • Homegrown automakers like BYD are pricing models—some as low as $10,000—while developing vehicles aimed directly at the globe’s most sought-after EVs. 

  • This race to the bottom on price, propped up by Chinese government subsidies, has intensified pressure on Toyota, whose China-based deliveries have fallen 13% year-over-year.

In response: Toyota is building a new EV plant in Japan to strengthen supply chains and scale production of affordable, and high-tech models like the just-leaked China-only bZ3C (developed with BYD).

Hedging its bets

Toyota’s slow approach to full electrification might seem cautious, but it’s based on a solid understanding of what consumers really want. Toyota hasn’t tried to accelerate the adoption curve of EVs or force the market in any one direction.

Instead, Toyota is banking on a multi-powertrain future that’s a blend of ICEs, hybrids, plug-in hybrids, with some electric and hydrogen models sprinkled in. 

The automaker isn’t making rash decisions and overhauling the entire supply chain overnight — Toyota simply asked, ‘Where is the world at now, and how can we meet that demand?’

Between the lines: Toyota’s hybrid-first strategy is paying off. Hybrid sales soared 46% year-over-year, driving a 9% boost in profit forecasts. In places like North America, Toyota’s already phasing out gas-only models, starting with the Camry. By doubling down on hybrids, they’re dodging the steep costs of EV infrastructure and the price cuts that companies like Tesla are relying on to clear inventory. 

Bottom line: Toyota sees the writing on the wall – the future of mobility won’t be a one-size-fits-all scenario. But whether it’s EVs or hybrids, Toyota will have the flexibility to land where the market does.

So — has Toyota flown as high as it can go? Not a chance. I’m more bullish than ever on the automaker, even if there are inevitable blips along the way.

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—Car Dealership Guy

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