VW Is Closing in on Toyota

By Takehiro Yamada : Reporter of Toyokeizai
August 08,2014
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Toyota’s operating profits for the period between April and June 2014, increased 4.4% on the same period last year to 629.7 billion yen, with their net profits increasing 4.6% to 587.7 billion yen. The operating profits for the period between April and June were a seven-year high, with net profits breaking records for the second year in a row. Incidentally, the operating profits and net profits in absolute amounts, and the operation profit percentage of 10.8%, were all record highs for a quarter period. The sales volume for the period between April and June increased by 9000 vehicles to a total of 2,241,000 vehicles.

For the full year ending March 2015, Toyota expect their operating profits to increase 0.3% to 2 trillion, 300 billion yen. This period, they are positioned to proactively make prior investments for future growth, or as President Akio Toyoda puts it, an “intentional temporary lull”.

Worrying announcement

However, there was a worrying announcement concerning the forecast for sales volumes. It was announced that on the January to December calendar year basis, global sales are expected to reach 10,220,000 vehicles, which is 110,000 vehicles less than what was planned for as of January this year.

Toyota warded off VW by a narrow margin in the first half to remain number one in the world, but...

For the full year ending March 2014, Toyota’s global sales volume was 10,130,000 vehicle, the first time an automobile manufacturer had ever broken the 10 million vehicle mark. They will break that barrier again for the full year ending March 2015, but whether or not they will maintain their position of having the number one global sales volume is yet to be seen.

The reason being that, in comparison to Toyota’s global sales volume of 5,097,000 vehicles for the period between January and June 2014, the number two company, Germany’s Volkswagen (VW), was right behind them with 5,066,000 vehicles. In the world’s largest market, China, VW’s sales volume increased by approximately 270,000 vehicles, closing the gap with Toyota from 184,000 vehicles at the same period last year, to just 21,000 vehicles.

When you consider the momentum that VW currently has, the chances are high that Toyota will lose the title of the world’s largest automobile manufacturer either sometime during 2014, or during the full year ending March 2015. Depending how you look at it, you could say that VW is already number one.

If you only look at the three months between April and June, VW had a sales volume of 2,623,000 vehicles, compared to Toyota’s 2,513,000.America’s General Motors was almost level with Toyota with 2,505,000 vehicles.

Actually, in 2013, VW also topped Toyota in the period between April and June. This is due to the difference in the two company’s sales volume in the Japanese market, where demands are high in the period between January and March, followed by a dry spell in the period between April and June. Their positions for the period between April and June may not be so important, but the fact is that Toyota’s grasp on the title of world number one is slipping.

Now is the time to gain a foothold

Even so, Toyota Motor Corporation executive, Koki Konishi, stated that “The order is the result. We just need to make every car a good car. We do no think that seriously about the order”. Toyota’s stance of not being bothered by surrounding evaluations and outside opinions, and continuing down their own path, may not be a mistake. The reason being that, in the early 2000s Toyota tried too hard to pursue success, and were burnt badly by the Lehman shock.

Of course, even though Toyota says they put absolutely no importance on growth or being the world number one, this is surely not the case. At the moment they are being realistic about this being an investment period, but in the not too distant future they are sure to put their foot on the accelerator.