Toyota's Q2 Sales Lag Behind Rival in Key Metric – Is Concern Warranted?

Ford’s Sales Growth and the Challenge from Toyota

Ford has shown impressive sales growth in recent quarters, raising questions about whether this momentum can continue long enough to surpass Toyota in U.S. sales during Q3. While Toyota Motor North America, which includes Lexus, delivered 54,374 more vehicles than Ford during Q2 at 666,469 units, Ford managed to achieve a 14.2% annual growth rate in Q2—7% higher than Toyota's. This trend suggests that if it continues, Ford could potentially overtake Tesla in U.S. sales during Q3.

However, Toyota still holds several advantages that could help it maintain its position. One of these is its diversified supply chain, which provides stability and resilience in the face of market fluctuations. Additionally, Toyota has a broader range of electrified vehicle options, including hybrids, plug-in hybrids (PHEVs), battery electric vehicles (BEVs), and fuel cell electric vehicles (FCEVs). At the end of Q2, Toyota reported having 32 electrified vehicle options available, the most among any automaker.

In June, Toyota's electric vehicle (EV) sales increased by 6.7% year-over-year on a volume basis, reaching 90,426 total units. This represented 46% of its June sales. In contrast, Ford had significantly lower electrified sales in the U.S., with 25,254 units sold in June. Much of Ford's Q2 success was attributed to its employee discount program for most of its inventory, which ended on July 6. This could impact Ford's ability to sustain its current pace of growth.

Toyota’s Manufacturing Footprint and Market Position

Toyota maintains a strong manufacturing presence in the U.S., despite producing fewer vehicles domestically than Ford. The company operates 11 manufacturing plants across 10 U.S. states, including North Carolina, Alabama, Indiana, Kentucky, Mississippi, Missouri, Tennessee, Texas, West Virginia, and California. Active shipments to Toyota’s North Carolina battery facility began in April, signaling continued investment in domestic production.

Toyota also reported having the lowest incentives among full-line manufacturers during Q2. However, lower incentives were not exclusive to Toyota. The share of 0% interest finance deals reached a record low of 0.9% of new car loans during Q2. In Q1, incentives increased by $150 year-over-year to $2,900+ per unit before dropping to $2,700 in the following quarter.

Competitors Facing Challenges

While Ford is placing pressure on Toyota, there are several major automakers that Toyota doesn’t need to worry about as much. After Q2, Volkswagen, Nissan, and Stellantis all reported year-over-year sales losses and significantly lower quarterly deliveries compared to Toyota. Volkswagen of America experienced the steepest decline at 29%, followed by Stellantis at 10% and Nissan at 6.5%. Volkswagen also had the lowest amount of Q2 deliveries at 71,395. Nissan moved 221,441 units in the U.S. during Q2, while Stellantis sold 309,976 vehicles.

Final Thoughts on the Automotive Landscape

Companies like Toyota should not ignore Ford’s strong performance, but they don’t necessarily need to be overly concerned about their competitor. Factors such as the end of Ford’s employee pricing program, a solid U.S. manufacturing footprint, and a more diverse vehicle lineup—especially in terms of electrification—could help Toyota maintain its edge.

Ford faces several hurdles in maintaining its momentum during Q3. One of Toyota’s primary challenges is having a lower U.S. inventory than its competitor. Starting in July, the average automaker had a new vehicle supply that could last 82 days. Ford’s supply was documented as lasting 101 days during this period, whereas Toyota’s was reported at about 39 days. This difference in inventory levels could impact future sales performance for both companies.