This Auto Giant Is Back On Top

Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Toyota Motor (NYSE: TM) recaptured the position of the world’s top automaker by dethroning archrival General Motors (NYSE: GM) in 2012. The automaker slipped to the third spot behind GM and Volkswagen in 2011 after its supply chain got disturbed when its production unit got hit by the Tsunami in Japan, followed by the floods in Thailand.

Toyota had challenged GM’s top spot in 2008 by putting an end to its 77 years record of holding the title of the top global auto giant. After being hit by the natural disaster in 2011, Toyota made a solid comeback in 2012 to acquire its lost spot by posting sales of 9.75 million vehicles, beating its own estimate of 9.7 million vehicles. The Japanese carmaker’s Scion, Hino, Lexus, and Diahatsu brands reported solid sales performance witnessing an increase of 23%. Let’s check out the details.

In regaining the lost ground – ‘make fine products’
Toyota’s impressive return to the top is attributable to the company’s strong product lineup supported by the marketing initiatives it made during the year. Toyota spokesperson Shino Yamada says that the solid figures are the ‘result of our policy...to make fine products.’

The US market has been pretty rewarding for the automaker, where it witnessed a remarkable jump of 26.6% to 2.08 million vehicles sold during the year, driven by its attractive lineup. In addition, the auto giant recognized the potential of the emerging markets and so is investing heavily in these nations. The Prius-maker plans to increase its focus in these markets and is designing cars to suit the need of the customers here. Other than this, the company’s cost cutting measures also had a favorable impact on its performance. The company also benefited from the huge pent-up demand from the buyers.

What about its fellow rivals?
The auto giant’s overall global sales rose 23% to 9.75 units compared to the prior year figure, and this includes the deliveries from its subsidiaries Hino Motors and Daihatsu Motor. On the other hand, GM’s global sales totaled 9.29 million units, followed by German maker Volkswagen’s sales of 9.07 million units. Domestic rival Nissan Motor recorded a sale of 4.94 million vehicles, while Honda witnessed sales rise of 19% to 3.82 million units during the year.

As per Autodata Corp, Toyota’s market share in the US increased from 12.9% to 14.4% in 2012, which helped it in reducing its gap with GM’s 17.9% market share. The company is closely behind Ford (NYSE: F), which covers 15.5% of the US auto market. Automotive consulting firm Polk estimates Ford’s market share will fall further to 15% in 2013 and 14.5% in 2014.

So what is the current year outlook for the lead automaker?

The road ahead
Toyota is off to a good start this year. The auto sales for January, which is generally a slower month for the automakers, have been surprisingly strong in US. The top three US automakers (GM, Ford and Chrysler) reported double digit sales gains. However, Toyota topped in terms of sales growth by posting a 26.6% surge in sales to 157,725 units. The Prius maker estimates to sell 9.91 million units this year, an increase of 1.6% over 2012 global sales. The automaker is relying on the US demand though its focus on emerging nations remains strong. The company is slated to introduce the revamped version of Corolla to contend Volkswagen Golf and Honda Civic. In addition, Toyota is said to be partnering with Bayerische Motoren Werke AG to manufacture a mid-sized SUV, develop a fuel cell system, work on light weight technology, and create better batteries.

Concluding thoughts
While Toyota has regained its title of top automaker, the other auto giants will do all that is required to battle for the top spot. The carmaker won the top position and now has a fair lead over both GM and Volkswagen. This is commendable despite the difficulties it faced in the Chinese market in the second half of 2012. Also, despite being the largest foreign automaker in China, GM couldn’t benefit much from Toyota’s poor outlook in the Chinese market, which could make a marked difference in its sales numbers.

Toyota’s policy to work on the quality of the product rather than run behind numbers has resulted in its powerful comeback. It will be interesting to watch how GM and Volkswagen fight for a better spot during the year.


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