Could Toyota overtake GM as the world leader in auto sales?

February 18, 2006

Both GM and Toyota released their annual reports for 2005 (Toyota’s includes a projection for Jan. - Mar. 2006, which is when their fiscal year ends). GM is still the industry leader, selling 9.2 million vehicles worldwide in 2005, (25.5% market share), but it is basically flat over their 2004 sales of 9 million even. Toyota projects it will sell 8 million vehicles, (12.3% market share), but a 7.3% increase over their 2004 sales of 7.4 million. Toyota’s year over year increase is 542,000 vehicles, while GM’s is 200,000 vehicles.

Worldwide, 2005 total auto sales were up 3.5%, at 64.5 million, and is expected to increase another 2% to 66 million in 2006. If GM and Toyota continue to grow at their present rate, Toyota will sell 8.5 million vehicles, and have 13% share, while GM will sell another 9.2 million, and be at 14.2% share. GM is not losing to Toyota, but Toyota is gaining from other manufacturers (Ford) to catch up to GM.

In 2005, GM had a $10 billion dollar net loss, or 5.4% of total sales. One of their steps to get out of the red is to reduce North American manufacturing capacity by 1 million units by December 2008 via closing plants.

Toyota’s net income, on the other hand, rose 9% to $8.6 billion (for the first three quarters of 2005 - their fiscal year ends in Q1 2006). They are planning to increase production worldwide by 1/2 million units by the end of March 2006 by investing in new plants, many of which will be in North America.

What it Means:
Don’t count GM out yet...it is incredibley difficult and expensive to grow market share, and Toyota has a way to go. However, if GM’s financial problems have caused them to lose their focus, it gives Toyota an opportunity to meet customers' needs and grow market share at GM's expense.

Action Steps:
Talk to your financial advisor about avoiding or even selling U.S. auto stocks. Make sure your Pacific funds include Toyota.

Source:
GM Annual Report
Toyota Press Release
Toyota Annual Report