Toyota beats GM -- Increase Asian auto funds

April 25, 2007

As predicted on this site last year, (See "Toyota on track to beat GM as world leader in auto sales") Toyota has beaten GM to become the world’s leading auto maker. In Q1 2007, Toyota sold 2.35 million vehicles, compared to GM’s 2.26 million. Although GM beat Toyota’s sales in 2006, (9.1 vs. 8.8 million vehicles), Toyota’s sales in the first quarter were 9.2% greater than last year, while GM’s was only 3% more. (Source: Bloomberg, April 24)

What Toyota beating GM means:
As we said last week, demand for smaller cars in the U.S. and Europe are driving sales of Japan’s auto makers (See “Tata Motors builds $3,000 car -- Buy Asian automakers"). GM’s losing corporate strategy has been to reduce its North American manufacturing capacity by 1 million units by 2008 to reduce overhead.

Toyota’s strategy, on the other hand, is to build plants to meet surging demand. Part of the demand is from perceived scarcity. Toyota never makes quite enough cars, so that people see them as slightly hard to get, and therefore more desirable. GM, on the other hand, has spent the last year discounting their vehicles because they had made too many.

Action steps:
Make sure your investment portfolio contains more Asian automakers and less U.S. automakers. Buy an American car, if that’s what makes you happy, but make sure your investments are driven by financial common sense.

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