Revenue and drivers
We’ll take a brief look at industry sales to assess Toyota Motor Company’s (TM) position in the global industry. First, we’ll look at industry sales, and second, we’ll assess Toyota’s ability to capture its share of the market. As we’ve seen, the top industry players are Toyota Motor Corporation (TM), General Motors (GM), Volkswagen (VOW), and the BMW Group (BMW). The exchange-traded fund providing industry exposure is CARZ. The next important consideration is where Toyota is selling its vehicles.
The chart above shows the regional changes in the automobile industry over the past five years. The big takeaway from this chart is the explosion of the Asia Pacific market from 20 million units in 2009 to 36 million units in 2013, driven by market demand in China. This boom offset the decline in Europe and the lower growth in North America. Latin America remains a small but significant market.
Hot in Japan, not in China
Toyota has a solid position in Japan, selling 2.4 million vehicles in an approximate 5.4 million per year market, translating to 44% of the market in Japan. The vehicle market in Japan is essentially closed to non-Japanese manufacturers. However, this strength shows the company’s weakness in China. Over the past five years as the automobile market in Asia, and particularly China, offset the weakness in the rest of the world, Toyota is playing catch-up. Toyota’s total Asian sales from the chart above is 1.6 million vehicles in an approximate 31 million per year market, excluding Japan. This reflects Toyota having an approximate 5% Asia-non-Japan market share versus 12% globally.
Toyota compensates for its below-average share in China by having above-average shares in North America and the Africa and Middle East markets. Whereas North America represents less than 25% of the global automobile market, it accounts for 29% of Toyota’s sales, and whereas Africa and the Middle East account for approximately 2% of the global automobile market, they account for 12% of Toyota’s sales. North America is the second-largest global market, so it’s a good place to be. Although Europe is 20% of the global market, Toyota sells only 10% of its vehicles in this market. Similarly, Toyota’s sales share in Latin America is less than the global share.
In short, Toyota sales are driven by Japan, North America, and Africa plus the Middle East. Just as poorly behaving Midwestern union workers attacked Japanese cars in the late 1970s, Chinese mobs attacked Japanese cars when national tensions rose between Japan and China. Toyota focuses on where it’s most likely to succeed. Now let’s find out why this matters in the next part of this series.