VW closes gap on Toyota's global sales lead

A Toyota Prius hybrid car (left) goes past a VW Tiguan at a dealership in Tokyo. VW aims to replaceToyota as the global No. 1 automaker.

Photo credit: REUTERS/Toru Hanai
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TOKYO (Reuters) -- Volkswagen is closing in on Toyota Motor Corp. as the global leader in vehicle sales, with a rapid expansion drive in China -- the world's biggest auto market -- while Toyota curbs growth to focus on shoring up quality.

Toyota, reigning at the top spot in the auto industry for two years in a row, today announced relatively robust global sales growth of 3.8 percent for the first six months of the year to 5.097 million vehicles, a record first-half result.

But Volkswagen is growing faster and its half-year total could pull even with or even surpass Toyota.

The Volkswagen group sold 4.97 million vehicles in January-June, up 5.9 percent from the same period a year ago, excluding figures from truck makers Scania and MAN that will be released on July 31.

IHS Automotive forecast Volkswagen's total first-half sales at 5.07 million vehicles including the truckmakers. The Toyota result, which the carmaker said reflected strong sales in the United States, China and Europe, exceeded the IHS forecast of 4.83 million.

General Motors, which Toyota overtook two years ago, said it sold 4.92 million vehicles in January-June.

China crucial

Even if Toyota manages to retain its crown for the first half, its position looks less secure for the full year.

"China is the driving force of the global market, and the degree to which a company is focused on that region is linked to the global sales performance," said Yoshiaki Kawano, a Tokyo-based analyst at IHS Automotive.

In China -- Volkswagen and GM’s largest market -- passenger-vehicle deliveries climbed 11 percent to 9.6 million in the first six months of the year, the China Association of Automobile Manufacturers said this month. Volkswagen’s deliveries in China rose 18 percent to more than 1.8 million, topping GM’s 11 percent increase to 1.73 million. Toyota, which fell behind Ford in China last year, boosted half-year sales by 12 percent to 465,900, according to the company.

Volkswagen, which sold 3.27 million vehicles in China last year, is planning to invest 18.2 billion euros ($24.4 billion) between 2014 and 2018 in new plants and products there together with its Chinese joint venture partners.

Toyota has put a freeze on the building of new plants until about 2016 and President Akio Toyoda has stressed that the company is focused on building better cars rather than chasing sales volume.

"Even if Toyota makes up its mind on potential investments soon, it'll be around 2017 when those plants can start operating," said Takaki Nakanishi, auto analyst and CEO of Nakanishi Research Institute.

Toyota's U.S. lead

Toyota is outpacing VW in the United States, where it benefits from U.S. buyers’ desire to drive sport utility vehicles, which are on pace to outsell sedans in the market for the first time. Rising deliveries of the new Toyota Highlander and Lexus GX drove U.S. market share gains as Volkswagen posted sales declines and pledged to introduce a mid-size SUV in 2016.

"They’ve gotten so good at building products that really hit with customers," said Jim Press, a former U.S. sales chief and 37-year Toyota veteran who now consults for the Renault-Nissan alliance. "Contrast that to Volkswagen: they don’t have this market figured out. They’ve failed to succeed in North America because they don’t really understand it."

In the U.S., deliveries of the Highlander SUV surged 17 percent this year through June, while sales of the RAV4 crossover climbed 15 percent. Toyota also more than doubled deliveries of its refreshed Lexus GX SUV.

Including more fuel-efficient, car-like crossover models, SUVs accounted for 36.5 percent of U.S. new-vehicle registrations this year through May, compared with 35.4 percent for sedans, researcher IHS Automotive said this month. Sedans, which held the top spot for decades, had led 36.6 percent to 33.9 percent a year earlier.

Toyota and Lexus SUV models outsold Volkswagen and Audi by 7-to-1 in the U.S. this year through June, according to researcher Autodata Corp. To revive flagging U.S. sales, VW plans to add a seven-seat SUV to its lineup in 2016 and build the model at its Tennessee factory.

Nakanishi expects Toyota to start announcing investment plans for new plants in the near future. It could open a new plant in Mexico, according to analysts and media reports.

Toyota and Volkswagen both have forecast more than 10 million deliveries for 2014. Toyota sold 9.98 million vehicles last year to lead the industry for the second consecutive year, followed by Volkswagen’s 9.73 million and GM’s 9.71 million.

Key new models

Introductions of crucial revamped models by Toyota and Volkswagen will help determine which automaker finishes the year on top.

Toyota plans to begin selling a reworked Camry with more contoured body panels and an updated interior in the third quarter to deliver a boost to the top-selling car in the U.S. for the last dozen years. The Camry widened its lead in the market over Honda’s Accord, Nissan’s Altima and Ford's Fusion during the first half, posting a 7.2 percent gain.

The Passat, Volkswagen’s best-selling sedan, will in the fourth quarter become the company’s first car available with a head-up display that projects speed and navigation information above the steering wheel. Volkswagen is seeking to reclaim its lead in Europe’s sedan market after Passat fell behind BMW's 3 series last year.

Volkswagen and Toyota both outpaced industry growth during the first half of the year in Europe, where automakers have posted 10 consecutive months of sales gains, the longest stretch in four years. Car demand is recovering from a two-decade low reached in 2013, with registrations rising 7.1 percent for Volkswagen and 6.8 percent for Toyota, according to the European Automobile Manufacturer’s Association, ACEA.

Profitability

Despite VW's expansion, profitability remains an issue, with its namesake brand's 2013 profit margin at 2.9 percent while Toyota's auto division achieved 8.8 percent and Hyundai Motor Co stood at 9 percent. Much of VW's production is in its home market of Germany, where workers secured a significant pay increase last year.

The Volkswagen group's brands include Volkswagen Passenger Cars, Audi, Porsche and Skoda, among others. Toyota includes the Toyota brand, Lexus, Scion, Daihatsu and Hino.

Bloomberg contributed to this report

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