🚙 Can Toyota Maintain Its Lead?

Rivian shares fall below first day closing price.

Hey Global Investor! Here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Wednesday’s Close) 4,700.58 -92.96 (1.94%)

NASDAQ (Wednesday’s Close) 15,100.17 -522.54 (3.34%)

FTSE 100 (5 PM IST) 7,483.50 -33.37 (0.44%)

NIFTY 50 (Today’s Close) 17,745.90 -179.35 (1.00%)

USDINR (Today’s Close) 74.47 (1 Year +1.49%)

🔥 Top Movers

EWTX +22.47%
XOMA +12.69%

ANNX -34.06%
AMBA -19.33%
DSP -17.28%

🚙 Toyota: Leader Of The Pack?

2022 started with a bang for Toyota Motor Corp. (TM). It has dethroned General Motors (GM) as the best-selling car company in the US. For the first time in 90 years, GM has not managed to sell the most number of cars in the US. Can Toyota sustain its numero uno position? (Tweet This)

Toyota Production System!

Carmakers, Video Game manufacturers, crypto miners – the shortage of semiconductor chips impacted everyone in 2021. General Motors cut production by 278K units through May. Ford slashed global output by half in Q2. Across the pond, Volkswagen, Daimler, BMW, and Renault had similar setbacks.

It was an altogether different story for Toyota, however. Its car production in North America continued at 90% capacity. While everyone else was tending to their wounds, Toyota achieved a record quarterly profit in the April-June period last year.

How was the impact on Toyota so minimal? For example, the 2011 earthquake that caused the Fukushima nuclear reactor accident had destroyed a major chip manufacturing facility belonging to Renesas Electronics Corp. Toyota was its major customer.

Back then, Toyota prepared a list of 1.5K parts, for which alternatives were necessary or needed to stockpile them. It also developed an early-warning system to address potential shortages. This system worked so well that when the same Renesas’ facility went offline due to a major fire accident, Toyota’s production plans were largely unaffected.

Although there was some cut back in production targets in the second half of the year, production was back to normal in December. All 14 plants and 28 production lines of Toyota in Japan operated normally for the first time since May. No wonder the results were what they were!

Toyota sold 2.3M vehicles in the US in 2021, up 10.4% Y-o-Y, compared to GM’s 2.2M vehicles which was down 12.9% Y-o-Y. Corolla sales rose 5%, Camry was up 6.6%. The RAV4 remained its top-selling vehicle, despite the SUV’s sales dropping 5% in 2021.

Toyota’s leadership was quick to clarify that while they may have surpassed GM in sales, that this is not their goal, and neither do they see it as sustainable.

An All-Electric Future!

Investors were also buoyed by the news that the company would launch its operating system by 2025. This OS will be built to handle advanced operations such as autonomous driving. It will also allow Toyota to capitalize on the fact that pretty much all of a vehicle’s functions today are software-driven.

This Toyota OS called “Arene” will have some competition. Volkswagen is already working on its “VW.OS.” Daimler is expected to unveil its “Mercedes-Benz Operating System” by 2024. Toyota’s Arene will also be made available to affiliates like Subaru.

Toyota plans to have a licensing model in place to make Arene available to other car manufacturers, including EV and autonomous driving companies. This list was also supposed to include Apple, but those talks have not made any progress since September last year.

Late last year, Toyota announced a $13.6B spending plan to develop EV battery technology by 2030 and collaborated with Subaru to unveil the Solterra EV at the Los Angeles Auto Show in November.

Toyota’s leadership has been upfront about their assessment that the company doesn’t expect to retain the top spot in sales in the long-term. That may well be the case, but as long as Toyota continues to be proactive in planning for contingencies as it did a decade back, the company will give stiff competition to its more reactive competitors in the US!

As all car manufacturers orient themselves towards an all-electric future, it remains to be seen if Toyota can train its guns on EV darling Tesla.

Market Reaction
TM ended at $196.95, down 1.1%, after Tuesday’s 7% rise.

Company Snapshot 📈

TM $196.95 -2.19 (1.10%)

Analyst Ratings (24 Analysts) BUY 71%  HOLD 29%  SELL 0%

Newsworthy 📰

Lower: Peloton subscriber growth slowing, analysts say, amid a wave of lower forecasts (PTON -4.70%)

Reality: Rivian stock plunges after news of Amazon-Stellantis deal (RIVN -11.22%)

Changes: Walmart cuts paid Covid leaves in half, as CDC isolation guidance changes (WMT +1.39%)

Later Today 🕒

  • Constellation Brands Inc. Earnings (STZ)
  • Walgreens Boots Alliance Inc. Earnings (WBA)
  • ConAgra Foods Inc. Earnings (CAG)
  • Lamb Weston Holdings Inc. Earnings (LW)
  • Helen of Troy Ltd. Earnings (HELE)
  • PriceSmart Inc. Earnings (PSMT)
  • Bed Bath & Beyond Inc. Earnings (BBBY)
  • 7:00 PM IST: Initial Jobless Claims
  • 7:00 PM IST: Trade Deficit
  • 8:30 PM IST: ISM Services Index & Factory Orders

Today’s Market Terminology: Income Bond

An Income Bond is a bond whose payment of interest is contingent on sufficient earnings. These bonds are commonly used during the reorganization of a failed or failing business

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