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The COVID-19 pandemic has been the prevailing issue affecting all auto lenders’ decisions and performance in 2020, halting manufacturing production and prompting months-long payment deferral programs for consumers and dealers.

Here are our top five stories in 2020:

Drop in demand spurs Honda, BMW production halts

American Honda and BMW AG were forced to suspend manufacturing production in multiple countries in March due to a pandemic-induced drop in demand. Production woes continued to plague the auto industry for months amid rising COVID-19 cases, prompting inventory concerns still felt at yearend.

Ally Financial offers COVID relief

Ally Financial, which manages an auto lending portfolio of more than $80 million, offered payment deferrals and other assistance to its dealer and consumer customers during the pandemic. Since March, multiple auto lenders have offered payment deferral programs for consumers, and many continue to work with customers on a case-by-case basis.

COVID drives demand for auto finance regulation

At the height of the pandemic, troubling levels of debt, record delinquencies and “abusive practices by lenders in the market,” prompted U.S. Senate leaders to seek action by the Consumer Financial Protection Bureau. One concern was that consumers were being harmed by interest accrued over the life of a payment extension.

Nissan joins others in pandemic aid efforts

Nissan Motor Co. and its captive, Nissan Motor Acceptance Corp., joined other auto lenders in March to help consumers through payment extensions on loans and leases. Franklin, Tenn.-based NMAC was the ninth-largest auto lender in 2019 with $44.7 billion in outstandings, according to Big Wheels Auto Finance Data.

Toyota Financial brings floorplan relief

Toyota Financial Services in March launched relief options for current and new dealer customers negatively impacted by the pandemic, including reducing rates on floorplan lines. Captives propped up their dealer partners in 2020 during widespread shutdowns, and subsequent losses, caused by COVID-19.

Automakers reported a mixed bag of sales for the last quarter of 2020, with General Motors Co. and Toyota Motor Corp. posting strong results thanks to pent-up retail demand for their cars and trucks.

Manufacturers likely sold about 15.9 million new vehicles on a seasonally adjusted annualized basis in December, down 4.7% from a year ago, according to an average of five market-researcher forecasts. Strong retail sales in the third and fourth quarters probably bolstered the results despite an uncertain economic outlook, lower fleet sales and the lingering pandemic.

GM reported stronger-than-expected fourth-quarter U.S. sales gains on Tuesday, Toyota was right on the money and Hyundai Motor Co. came in below analysts’ consensus forecast but still had a respectable quarter. Nissan Motor Co. managed to beat estimates for the latest quarter but had its worst year in more than a decade. Other companies set to post results later today include Fiat Chrysler Automobiles NV and Honda Motor Co.

The overall resilience of the U.S. market — which saw annualized sales plunge to more than 40-year lows in April as automakers temporarily closed factories and showrooms — has buoyed profits and kept dealer inventories tight.

Automakers are poised to ride their momentum from late 2020 into the new year, which may show continued improvement in demand for cars and trucks.

“We look forward to an inflection point for the U.S. economy in spring,” GM Chief Economist Elaine Buckberg said in a statement. “Widening vaccination rates and warmer weather should enable consumers and businesses to return to a more normal range of activities, lifting the job market, consumer sentiment and auto demand.”

Here are highlights (and lowlights) from the companies that are reporting results for December:

Nissan’s Lost Decade

Nissan’s woes continued as it posted an eighth straight quarterly decline, with sales dropping 19% in the last three months of 2020. Bucking an industry trend, the company’s worst performers included sport-utility vehicles such as its full-size Armada, mid-size Pathfinder and the small Frontier pickup.

For the year, Nissan’s deliveries sank 33% to 899,217 vehicles — the lowest since 2009, when sales totaled just 770,103 amid the Great Recession. The company is ailing from an aging lineup and managerial turmoil in North American and at its Yokohama headquarters.

December to Remember

Japan’s largest automaker — which owns almost half its home market — posted a 20% surge in U.S. sales from a year ago in December and a healthy 9.4% gain to 660,715 vehicles in the fourth quarter.

Toyota saw robust demand for its top-selling RAV4 compact SUV, Camry sedan and mid-size Highlander SUV. Gas-electric hybrid versions of all three helped propel deliveries. For the full year, sales fell 11% to 2.1 million vehicles — with hybrids accounting for almost 16% of the total.

Toyota expects that trend to continue. “As we look to 2021, we can see hybrids being 20%-25% of our business,” Bob Carter, Toyota’s executive vice president for North American sales, told reporters last month.

GM Strong

The Detroit automaker set the pace for its peers with a 4.8% increase in quarterly deliveries to 771,323 vehicles — its best fourth quarter for retail sales since 2007. Average transaction prices in the three-month period climbed to a record $41,886, a testament to GM’s embrace of bigger sport-utility vehicles such as the Chevrolet Tahoe and GMC Sierra pickups.

In all of 2020, GM limited the damage to a 12% decline to 2.5 million vehicles.

Hyundai Hums Along

The South Korean automaker came in below quarterly estimates but has been on a roll with slick SUVs including its full-size Palisade and compact Venue. It posted a 2% gain in December from a year ago and 2% drop for the fourth quarter to 178,844 vehicles. SUVs made up 70% of its retail sales last month.

For the year, Hyundai’s U.S. sales fell 10% to 622,269 vehicles, pulled lower by a plunge in fleet deliveries to commercial customers.

— By Chester Dawson, Keith Naughton and David Welch (Bloomberg)

— With assistance from Gabrielle Coppola (Bloomberg)

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Investors should see two scenarios playing out among automakers in Japan this week as the nation’s biggest car manufacturers report their financial results.

On one side is Toyota Motor Corp., which thanks to its forward supply-chain planning has weathered the pandemic relatively well. On the other, everyone else, mired in a morass of factory closures due to the global chip shortage.

“There will likely be winners and losers, depending on their inventories,” said Nakanishi Research Institute’s Takaki Nakanishi. Already that bifurcation can be seen in the U.S. between General Motors Co. and Ford Motor Co., which sees a $2.5 billion chip-shortage cost, he said. GM meanwhile left its full-year outlook unchanged earlier this month.

Like all automakers, Japanese firms have been hurt by a reduction in consumer demand as a result of Covid, although car sales picked up as the year progressed. What’s really hurting is the widespread shortage of semiconductors, caused by a surge in demand for the chips used in electronic devices like laptops, mobile phones and games consoles.

As the consumer devices sector sucked up inventories, many carmakers were left empty handed, sparking wave after wave of production line stoppages. A fire at Renesas Electronics Corp.’s automotive chip plant in Japan and winter storms in Texas only made matters worse.

Toyota, which owns around 3% of Renesas and is one of the company’s largest customers, even sent workers to its Naka plant in eastern Japan in an attempt to keep its own supply chain alive. “Renesas largely owes Toyota” because Toyota supported the chipmaker after Japan’s 2011 earthquake and recent fire, said Takeshi Miyao, an analyst at Carnorama. “In a way, it has an obligation.”

But for smaller and less powerful automakers, procuring chips is a lot harder. As carmakers scramble, the power dynamic that exists between them and chipmakers has been turned on its head. Although global vehicle sales are forecast to expand about 10% in 2021, they’ll still be far below pre-pandemic levels due to “disruptions to the supply chain on the supply side and many consumers navigating difficult financial circumstances resulting from the Covid-19 pandemic on the demand side,” according to Fitch Solutions.

Investors shouldn’t therefore expect much optimism from this latest round of financial results, rather a slew of conservative forecasts that talk mainly to supply chain and ongoing virus risks, Bloomberg Intelligence analyst Tatsuo Yoshida said.

Here’s what we might see from some of the biggest names.

Toyota

• Investors will be paying attention to whether Toyota will forecast an operating profit for the upcoming fiscal year ending March 2022 that’s higher than pre-pandemic levels, or stick with a more conservative projection
• While the situation is likely to grow murkier in the summer, so far Toyota has emerged largely unscathed from the chip shortage miring its competitors. Analysts are projecting, on average, an operating profit of 2.7 trillion yen ($25 billion) for the fiscal year to March 2022
• For the fiscal year ended March, investors will be looking at whether Toyota, benefiting from recovering global demand for cars, is able to beat its bright operating profit target issued in February
• Previously, Toyota raised its operating profit outlook by more than 50% to 2 trillion yen for the period; analysts project, on average, 2.1 trillion yen. Toyota reports May 12

Nissan

• Japan’s other large carmaker, Nissan Motor Co., will be watched for whether its continuous cost-cutting and recovering sales this calendar year mean an operating profit in the most recent quarter and an operating loss for the fiscal year that’s at least better than the company’s previous forecast for a 205 billion yen deficit
• How many cars Nissan was able to produce in the 12 months through March will also be a gauge of to what degree its operations are being impacted by the global chip shortage; it previously forecast it would sell about 4.02 million vehicles in fiscal 2020, 150,000 units less than previous projections
• In addition, investors will be paying attention to whether Nissan forecasts an operating profit for the fiscal year ending March 2022; in fiscal year 2019, before the pandemic hit, it posted an operating loss of 40 billion yen
• Nissan announces May 11

Honda

• While Honda Motor Co. will likely beat its fourth-quarter operating profit forecast, it will probably have pretty conservative guidance for fiscal 2022 because of the coronavirus and supply chain risks, Yoshida said
• Market expectations are for an operating profit of 761 billion yen for the fiscal year to March 2022
• Honda, which reports May 14, boosted guidance in February, saying it now targets an operating profit of 520 billion yen for the current fiscal year, with sales tracking well despite the chip shortage
• Chip issues have however caused the Tokyo-based group to halt three plants in Japan for around five to six days this month. Delivery of its new SUV Vezel — especially Vezel’s luxury model — could be delayed for several months, a sign that the chip crisis is still severe
• Earlier this week, Honda said it would close factories in Thailand and India in May, on both the chips and Covid crises
• The market will be watching for any concrete plans around Chief Executive Officer Toshihiro Mibe’s ambitious goal of 100% electric vehicle sales by 2040, particularly given Honda’s struggles to improve profitability in its four-wheeler segment

Subaru

• Smaller Subaru Corp. has been hit hard by the chip crunch. The automaker halted output in the U.S. and Japan, slashing production by 25,000 units in total
• Last year, Subaru’s profits were propped up by strong demand in the U.S., where it gets about 72% of its business. In February, Subaru cut its sales target by 43,000 units to 868,000
• It now sees operating profit of 100 billion yen for the fiscal year through March, lower than the average 124 billion yen analysts predict. Its results come May 11

Mitsubishi Motors

• Mitsubishi Motors Corp. also hasn’t fared too well, in April trimming production by as many as 16,000 cars globally this month — that’s almost one-fifth of total output.
• To weather the crisis, Mitsubishi, which also reports May 11, is turning to Southeast Asia, in an attempt to also bolster the Nissan-Renault-Mitsubishi alliance
• However sales in some of those nations, like the Philippines and Thailand, are faltering as Covid infections rage

–With assistance from Tsuyoshi Inajima.

Toyota Financial Services last year leaned on its proprietary app, Toyota for Good, to advance its community service initiatives amid the COVID-19 pandemic as shelter-in-place orders made in-person visits impossible. 

Toyota for Good launched in March 2020 at the height of the pandemic and made it possible to engage team members in virtual volunteering opportunities, Ellen Farrell, vice president of general counsel at Toyota Financial Services (TFS), told Auto Finance News.

Going forward, TFS plans to continue their virtual connectivity along with in-person volunteering, in order to further expand the scope of the communities reached. In addition, virtual opportunities provide greater opportunity for team members to carve time out of their schedules for mentoring since they don’t have to account for travel time, Farrell said.

TFS focused on virtual visits with elderly people as a way to give seniors a “lifeline of community” at a time when little personal interaction could take place, Farrell said. TFS issued grants to close the digital divide by giving internet and computer access to seniors without virtual connectivity. Specific figures on the grant were not provided. 

“We were working with our nonprofits to help make sure that more folks who otherwise didn’t have access could avail themselves if they wanted to have these kinds of opportunities,” Farrell said.

TFS also used virtual mentorships to continue their youth development work with the Girl Scouts, Junior Achievement and the Boys and Girls Club of America. Team members at TFS connected with youth virtually to discuss career education and financial literacy, Farrell said.

“Kids need to be career ready when they graduate high school, whether they go to college or they don’t. That’s really important to us and we’re focused on that,” Farrell said. “The education piece is something we are all in for, and that’s what promotes equity going forward in the communities.”

TFS also leveraged its strong position in the capital markets and expertise in virtual connectivity to help aid in diversity, equity and inclusion initiatives, issuing a $750 million diversity and inclusion bond to help diverse minority-owned underwriting firms show their capabilities in the capital markets, Farrell said. These include Blaylock Van, CastleOak Securities, Great Pacific Securities, Ramirez & Co. and Siebert Williams Shank, to name a few. 

The bond’s purpose is to “help these firms get their names out there and build their business, because they share our values and give back to the community, so it’s a win-win,” Farrell said. 

TFS also issued a $110,000 grant to Historically Black Colleges and Universities (HBCU) to help create an infrastructure allowing students to tour campuses virtually to learn what HBCUs have to offer, Farrell said.

Still, other initiatives supported by TFS were not so easily flipped to a virtual setting. In the past, TFS has sponsored the AIDS/LifeCycle event, which was cancelled in 2020 and 2021 due to the pandemic. Despite this, TFS was still able to raise $100,000 for the organization through virtual fundraisers, Farrell said.

Auto Finance Summit, the premier industry event, returns October 27-29 in Las Vegas. The Summit continues to bring together the best and brightest in the industry year after year for unparalleled networking and professional education. To learn more about the 2021 event and register, visit www.AutoFinanceSummit.com.

Toyota Motor Corp. plans to spend 1.5 trillion yen ($13.7 billion) on the supply and development of batteries for hybrid and electric vehicles by 2030, joining other global automakers boosting investments in anticipation of greater demand.

The world’s No. 1 automaker will commit roughly 1 trillion yen for production lines, Toyota executives announced at an online briefing Tuesday. It will also seek to set up 70 EV battery lines by 2030 and is aiming to secure 200 gWh of battery supply by then, up from its previous goal of 180 gWh.

BMW AG disclosed on Monday that it will increase orders for battery cells to more than 20 billion euros ($23.8 billion), up from 12 billion euros previously. While Toyota’s moves appear slight compared to Volkswagen AG’s $29 billion push to build six battery factories in Europe for a total of 240 gWh by the end of the decade, they reflect a more bullish stance from the Japanese automaker, which in the past had questioned whether the high cost of electric vehicles will inhibit their near-term spread.

Now, Toyota is readying 200 gWh worth of batteries “or more” based on the potential of battery EVs “spreading quicker than expected,” Chief Technology Officer Masahiko Maeda said at the briefing. “Zero-emission vehicles are important in regions where renewable energy is widely adopted,” Maeda said. That’s why “Toyota is preparing a full lineup of CO2 emission-reducing vehicles,” he said.

Why Building an Electric Car Is So Expensive, For Now: QuickTake

Earlier this year, Toyota announced plans to introduce 15 EVs globally by 2025, to a certain extent quelling concerns that it is falling behind in the industrywide pivot to electric cars. Seven of the models are part of Toyota’s new “bZ” series, the first of which was previewed at the 2021 Shanghai Auto Show in April.

Still, at the briefing Tuesday, Toyota stuck to its usual messaging that non-EV cars such as hybrids will continue to play a lasting role in global auto markets in the coming decades. Although the emissions-reducing potential of an EV is three times that of a hybrid, “we can provide hybrids at an affordable price,” Maeda said. That’s why at the moment “using hybrids is an effective way of reducing carbon emissions.”

Going forward, Toyota will look to make a number of improvements to its batteries to lower the total cost of EVs. The company is targeting a per vehicle cost reduction of 50% for its future batteries, according to Maeda. Toyota also sees solid-state batteries boosting the performance of hybrid and battery-electric cars, and is looking to put the next-generation batteries into practical use in the first half of the decade, he said.

While the path to decarbonization of the auto industry remains unclear in many ways, “Toyota’s laid out a path forward that allows it to adapt to various changes,” wrote Bloomberg Intelligence analyst Tatsuo Yoshida wrote in a note. Based on factors such as various regions’ uptake of renewable energy, “Toyota will be able to respond flexibly,” Yoshida said.

– By River Davis (Bloomberg)

Toyota Motor Corp. wants the world to know it’s serious about competing in the market for battery-based electric vehicles.

The world’s biggest carmaker is planning to invest 4 trillion yen ($35.2 billion) to supercharge its EV push, with a target to sell 3.5 million units annually by the end of the decade, Chief Executive Officer Akio Toyoda said at a briefing Tuesday. Toyota will roll out 30 electric models by 2030, a step up from a prior plan to introduce 15 EVs globally by 2025.

The new targets show Toyota intends to compete seriously with Tesla Inc., Volkswagen AG and other global rivals as the car industry shifts away from combustion engines and into a new era of greener automobiles. The announcement also reflects a more aggressive push into the electric arena by Toyota, which has for years questioned whether the world — outside of parts of the U.S. and Europe — is truly ready for EVs.

Toyota will also pour another 4 trillion yen into hybrid and fuel-cell car investments, bringing the total amount dedicated to electrification efforts to 8 trillion yen. That compares with a recent announcement by Nissan Motor Co. to invest 2 trillion yen in/on developing EVs and a commitment by VW to invest around 52 billion euros ($58.6 billion) in the development and production of new electric vehicles, the industry’s biggest push.

“Instead of predicting the future, we want to be ready for any change,” Toyoda said. “Until the path ahead is clear, we want to provide our customers with a range of options.”

Asked why Toyota decided to upgrade its targets, Toyoda said that new energy policies announced by nations at at the COP26 summit earlier this year prompted the automaker to update its targets. “As policies became clear we thought about our own policies and came up with this new figure,” Toyoda said.

Toyota’s been slower to release mass-market electric cars compared with European peers, choosing to invest in a wide range of emission-reducing vehicles from hybrids to hydrogen-powered cars.

What Bloomberg Intelligence says:

“Toyota Motor could pose a formidable challenge to Tesla on its plan to spend 4 trillion yen to accelerate battery-powered electric vehicle output over the next nine years through 2030, which we believe is unlikely to significantly hurt profitability.”

— BI auto analyst Tatsuo Yoshida.

Toyota is betting that EVs are a good fit for countries with high incomes and built-out charging infrastructure as well as the ability to make and charge batteries with electricity derived from renewable sources, Toyota Vice Chairman Shigeru Hayakawa said in an interview last month. For regions that don’t fit those conditions, hybrids will play a crucial role in decarbonizing transportation over the coming decades, he said.

For its Lexus brand of luxury cars, Toyota plans to make the lineup fully electric across the globe by 2035, Toyoda said.

Earlier this year, Toyota said its goal was to sell 8 million electrified vehicles in 2030, including 2 million fuel-cell cars and BEVs, with the rest consisting of hybrid vehicles. That’s out of the roughly 10 million vehicles it currently sells each year.

More recently though, Toyota’s stepped up its EV push. That comes as a number of countries implement stricter emissions regulations and move to allocate more money for EV purchase incentives and charging stations.

Earlier this month, Toyota said it would be ready to sell only zero-emission cars in Europe by 2035 to align itself with the region’s ambitious climate plan. The following week, Toyota said it will invest $1.29 billion in an automotive battery manufacturing facility in North Carolina, part of larger plans to spend 1.5 trillion yen on battery production and research over the next decade.

“Not being 100% EV doesn’t mean we don’t have aspirations,” Toyoda said of the automaker’s decision to offer a wide range of electrified models. “Our actions over the next 5 years will change our future. We are leaving as many options as possible.”