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A must-know investor’s guide to Toyota Motor Corporation (TM)

A must-know investor’s guide to Toyota Motor Corporation (TM) (Part 1 of 7)

A must-know investor’s guide to Toyota Motor Corporation

Toyota

Toyota Motor Corporation (TM) designs, builds, and sells automobiles worldwide. It’s the largest automobile manufacturer in the world based on units sold in 2013.

AUTO COMPANY MARKET SHAREEnlarge Graph

Market share

According to the 2013 annual numbers, Toyota has a 12% market share—just ahead of General Motor’s (GM) 11% global market share and Volkswagen’s (VOW) 11% global market share. Toyota took the number-one position in the U.S. in 2008. Behind the sales numbers are the large fleet sales Ford Motor Company (F) and GM make each year. Fleet sales boost these companies’ sales numbers but are much less profitable than selling through the traditional retail channel Toyota focuses on.

Toyota dates back to the 1930s in Japan, when it was founded by the son of a successful businessman who developed an automatic loom manufacturing company. Toyota began exporting to the U.S. in 1957. Initially, adoption was slow, as this was the age of large cars. In 1973, the OPEC (Organization of the Petroleum Exporting Countries) embargo and resultant increase in oil and gas prices increased U.S. consumers’ adoption of smaller cars. Toyota gained market share throughout the next decades. Toyota opened its first U.S. manufacturing facility via a joint venture with General Motors in 1984 in California and opened a wholly owned plant in Kentucky in 1988. Toyota established a U.S. headquarters in 1982, expanding into luxury cars in the 1980s, pickup trucks in the 1990s, and hybrids in the 2000s. These expansions extended beyond Toyota providing a range of reliable cars and minivans. Toyota has been successful with each of these new product areas.

Chart TM vs SPYEnlarge Graph

Stock

Toyota’s stock price underperformed the S&P over the past five years. Toyota didn’t flirt with bankruptcy like its U.S. based competitors did. Toyota was negatively impacted by the downturn and recalls. Toyota’s floormats and electronic throttle systems were recalled on several models over the past seven years. In late 2013, Toyota was found liable for the deaths from its cars malfunctioning, which sent the stock down in 4Q13. The company reached a $1.2 billion settlement with the U.S. government in March 2014. It dipped with the market when Russia’s troops became involved in Ukraine. Toyota is now gaining with other automobile manufacturers.

Overview

In this series, first, we’ll look at Toyota’s strategy. Then we’ll dig into the company’s revenue and earnings to see how Toyota compares to other industry players. Next, we’ll look at the company’s financing structure. Then we’ll turn to the equity markets to see how Toyota is valued against its peers. We’ll provide a look at the risks and opportunities for Toyota. This series is an overview of Toyota and how it stacks up against its peers, including General Motors (GM), Ford (F), the BMW Group (BMW), and Volkswagen (VOW). Investors may also gain industry exposure through the exchange-traded fund CARZ.

The Realist Discussions

  • spawn44

    Your analysis reminds me of writing how good a particular team is that just won several super bowls. Going forward I would put my money on Ford over Toyota.