See Empty Car Lots? Blame Toyota (at least a Little Bit)

July 29, 2024
By Kevin Jackson

Welcome to "We Know Toyota." I say "Know Toyota" because, let’s be honest, most people want knowledgeable salespeople, but the reality is that many aren’t as informed as they should be about the cars they’re selling. We on the other hand, make it our mission to study everything Toyota every single day.

But it could just as easily be "We Love Toyota" because, really, what’s not to love? Toyota has been the industry leader in quality, safety, reliability, and technology for decades. No other car manufacturer has been as consistently excellent as Toyota, and that’s why we are proud to know—and love—this brand.

That being said, I’ve got to throw a little blame Toyota’s way for the empty car lots and the worldwide car shortage we’re seeing today. Sure, the semiconductor chip shortage has been the go-to scapegoat, and while it’s certainly a big part of the problem, there’s another underlying factor: Toyota's adoption of the "Just In Time" production philosophy. In fact, Toyota’s success with this approach has influenced nearly every other auto manufacturer to follow suit.

So, what exactly is the "Just In Time" (JIT) philosophy? Back in the day, automakers kept large warehouses stocked with raw materials and parts, ready to be used whenever needed. This approach ensured that production never halted, but it also tied up massive amounts of money in inventory. Toyota, especially in the 1960s and 70s, couldn’t afford to do that if they also wanted to innovate and advance the safety of their vehicles.

Enter Kiichiro Toyoda, Toyota’s founder, who pioneered the JIT production model. Instead of stockpiling parts, Toyota would only order them as needed. This way, they didn’t have millions tied up in inventory, allowing them to invest in continuous improvement, safety, and technology—key factors that have made Toyota a consistently great brand over the years.

JIT is brilliant—99% of the time. But then something like a global pandemic comes along and throws a wrench into the works. When COVID-19 hit, car manufacturers, including Toyota, forecasted a drop in sales and adjusted their orders for parts accordingly. But no one could have predicted the trillions of dollars in economic stimulus that would flood the market, causing an unexpected surge in car demand. By the time manufacturers realized the demand was there, the semiconductor chips they needed had already been snapped up by other industries, leading to the empty car lots we’re seeing today.

So yes, I do put a little blame on Toyota—not for making a mistake, but for being so darn successful that everyone else copied them. The result? A global car shortage that no one saw coming.

But at the end of the day, Toyota’s commitment to innovation, safety, and quality hasn’t wavered, and that’s why I still say nothing but peace, love, and a Toyota in your future.

Until our next article, stay safe and drive smart.