VW pulls ahead of Toyota in global market share
The next leg of the race between the two car makers hinges on sales in China and the US
Frankfurt/Tokyo — Toyota lost its crown as the world’s best-selling car maker to Volkswagen, ending the Japanese company’s four-year reign, as it faces challenges that range from the threat of trade barriers in the US to slowing demand in China after a tax increase.
Worldwide sales for Toyota, including its Hino and Daihatsu units, rose 0.2% to 10.175-million vehicles in 2016, the Japanese car maker said on Monday. That fell short of Volkswagen’s record 10.3-million cars, trucks and buses, a 3.8% gain.
Toyota lagged behind Volkswagen mainly due to the diverging fate in their largest overseas markets. While the Japanese company was hampered by a broader US car industry sales slowdown, VW benefited from its growth in China and a tax cut that has stoked buying since 2015.
The race between the two still hinges on the two markets this year, as Toyota responds to policies of US President Donald Trump and VW faces decelerating demand in China as the tax reduction expires.
Since his inauguration, Trump has withdrawn the US from the Trans-Pacific Partnership (TPP) trade accord, reaffirmed a campaign promise to renegotiate the North American Free Trade Agreement (Nafta) involving Mexico and met car makers to persuade them to keep production within the US.
Toyota will invest $10bn in the US over the next five years, maintaining its pace of spending during the past five years, joining other manufacturers with highlighting projects in response to pressure from Trump to create jobs in the US. After criticising Toyota’s plans to build a Corolla plant in Mexico, Trump rebuked Japan last week for sending the US hundreds of thousands of cars from what he said were "the biggest ships I’ve ever seen".
The Toyota City, Japan-based car maker built its first US assembly plant in Georgetown, Kentucky, three decades ago in part to appease Washington during an era of icy trade ties. Since then, it has added factories in the country.
Last year Toyota built more than 1.38-million cars and trucks in the US, behind only General Motors (GM), Ford and Fiat Chrysler Automobiles. Still, Toyota’s production was about 1-million vehicles short of its sales in the country. Any push for investment growth will come up against a US car market that is likely to wane after a reaching a peak in 2016.
"The development of the US market is set to decide if VW can stay ahead of Toyota this year," Sascha Gommel, a Frankfurt-based analyst at Commerzbank, said by phone. "If the Chinese and European markets continue to be solid and the US market weakens as I expect, VW might stay first in 2017 as Toyota has a larger exposure to North America."
Toyota’s profit was more than double Volkswagen’s in the six months to end-September, according to data compiled by Bloomberg. Both companies have not reported earnings for the quarter to end-December.
The Japanese car maker’s deliveries in the US declined last year, trailing industry-wide growth, as demand for its Camry waned ahead of the introduction of the new generation of the US’s best-selling sedan. The latest iteration of the model was unveiled at the Detroit car show earlier in January.
In 2008, Toyota ended GM’s 77-year reign as the world’s largest car maker, holding on to the top annual sales spot until 2011, when it surrendered the title after production was disrupted by natural disasters in Japan and Thailand. The Japanese company regained the lead in 2012 and kept the position until the end of 2015.
For Volkswagen, taking the global sales crown marks the bittersweet culmination of an aggressive expansion that former CEO Martin Winterkorn kick-started 10 years ago. While surging demand in China and expansion of the upscale Audi and Porsche brands’ line-ups have propelled sales gains, the Wolfsburg, Germany-based giant’s growth hit a wall in September 2015, when the car maker and US regulators revealed that some of its diesel engines carried software to cheat on emissions tests.
Volkswagen’s namesake brand accounted for almost 6-million of the group’s global deliveries in 2016. The marque is targeting sales of 3-million cars this year in China, the company’s biggest national market. In Germany, its second-largest market, the division is reducing its large leasing fleet for employees, which started to hurt new-car registrations towards the end of last year.