Global Insight Perspective | |
Significance | Global Insight's forecast data appears to confirm that Toyota will overtake General Motors for the first time in the 2006 calendar year as the world's number-one carmaker by production volume. |
Implications | Toyota has gradually been adding production capacity in the United States, Asia and Europe, while GM has been scaling back operations by closing down plants and reducing capacity. Toyota's feat in overhauling GM represents a sea change in the balance of power in the global automotive industry as the big U.S automakers remain hamstrung by high legacy costs and uncompetitive model line-ups. |
Outlook | Toyota's position as the world's number-one carmaker in terms of volumes looks unassailable in the short term due to the parlous state of its rivals and the company's policy of continual investment in new production capacity and vehicle research and development. |
Toyota Overtakes GM as World's Largest Volume Carmaker in 2006
According to the latest Global Insight forecast data, Toyota will finally overhaul General Motors (GM) as the world's number-one carmaker by sales volumes in the full 2006 calendar year. The latest forecast has Toyota producing 9,018,461 units for the year, while GM is forecast to have built 8,714,803 units. This compares to 2005's actual figures of 8,322,417 units for Toyota and 8,615,949 units for GM. While Toyota has been busy adding production capacity and building new plants over the past 12 months, GM has been taking exactly the opposite path in the face of consistently heavy losses. The company has had an extremely difficult 2006, with the abortive and highly public discussions relating to a potential alliance with Renault-Nissan and the appointment and subsequent resignation of Jerry York, investor Kirk Kerkorian's chosen board representative. GM has also undergone a massive employee buy-out programme, plant closures, as well as the continuing difficulties of its main component supplier, Delphi, which is currently in Chapter 11 administration. Amid all these developments, GM's global vehicle production and sales have remained static, while Toyota's have risen as a result of extra investment in plant capacity.
Reported and Forecast Combined Global Production Figures for Top-Five Automakers | ||
Group | 2005 | 2006 (F) |
Toyota | 8,322,417 | 9,018,461 |
GM | 8,615,949 | 8,714,803 |
Ford | 6,480,914 | 6,393,094 |
Renault-Nissan | 6,268,058 | 6,111,421 |
VW Group | 5,216,650 | 5,650,128 |
F = forecast | ||
Toyota Has Invested Heavily in New Plants
Toyota's production has risen in 2006 as a result of new capacity investment in the United States and Asia. The company has added capacity in Indiana and Texas to build the new Camry hybrid and Tundra pick-up truck, respectively. The company's market share in the United States has also risen correspondingly, with it looking set to take the number-two spot from Ford in 2007. Ford has said that it expects its U.S. market share to slip to around 14% to 15% in 2007 from 16.6% in January-November 2006. Toyota's share in the same period was 15.3% and is expected to rise. Toyota is constantly consolidating its position by entering into a number of strategic partnerships and alliances. Toyota last month formed an equity tie-up with truck-maker Isuzu Motors Ltd in a bid to develop clean diesels, a complementary technology for its signature hybrid system. Last year it took a stake in Fuji Heavy Industries Ltd, partly as a way to quickly add further production capacity in North America.
Outlook and Implications
The news that Global Insight's data places Toyota ahead of General Motors (GM) in terms of global production volumes confirms the Japanese company's position as the pre-eminent force in the global motor industry. Toyota was already the world's leading volume automotive manufacturer in terms of profitability, size and global reach, and it now officially has no peers. This is borne out by the fact that the company's current market cap of US$215 billion makes Toyota worth almost as much as Honda, DaimlerChrysler (DCX), Nissan and BMW combined. The company is continuing to forge ahead with new investments and projects that it hopes will consolidate this position. The new collaboration with Isuzu will bolster Toyota's research and development (R&D) capability in the field of clean diesel engines, as well as giving it a significant stake in a company that has excellent potential synergies with Toyota in terms of its model range. The company has also outlined plans to further fuel growth in the United States through the Scion brand and by enhancing its truck line-up. The company's enhanced efforts in the area of diesel technology will also help its growth in Europe, where diesel passenger cars account for around half of all passenger cars sold in the market.
The really alarming aspect for Toyota's rivals about the company's rise is the fact that Japan's number-one carmaker has achieved the feat without having a particularly convincing strategy in China and India, the world's two fastest-growing major automotive markets. The company is only just beginning to catch up with Volkswagen (VW) and GM in China, and has had no small-car offering in India, vital for success in that most price-sensitive of markets. With the company now working hard to address these weaknesses, Toyota looks set to only strengthen its position in the coming years. Toyota's corporate philosophy was neatly summed up by its president, Katsuaki Watanabe, recently. When asked about the possibility of Toyota surpassing GM, he answered: "That would merely be the result, not the goal."