Source: The Wall Street Journal
Volkswagen stole Toyota’s crown, but investors may not care
Car buffs, journalists and economists pay a lot of attention to unit-car statistics, but investors shouldn’t—just look at Volkswagen’s rise to the top of the official league table of manufacturers.
Toyota, which overtook General Motors in the International Organization of Motor Vehicle Manufacturers’ ranking in 2008 for the first time, announced Monday that it produced 10.21 million cars in 2016. Earlier in January, Volkswagen said it delivered 10.31 million vehicles to dealers in 2016. Assuming deliveries are a decent proxy for production, the German car maker has surpassed Toyota to become, for the first time, the world’s largest car maker.
China is the key reason. Volkswagen and GM dominate the Chinese market, each producing more than three times more cars than Toyota. Since the Chinese market is by far the world’s largest and grew 15% in 2016—far faster than other markets—this was a decisive advantage.
Still, ranking car makers by the number of vehicles they produce generates little more than bragging rights. The number of vehicles sold would be a better benchmark of commercial success than the number produced—if only the industry weren’t rife with reports of manipulated sales statistics.
Even production is a slippery concept. According to figures unearthed by blogger Bertel Schmitt, Toyota also makes hundreds of thousands of cars on behalf of other companies. Add in the 212,846 cars Toyota’s Daihatsu unit made in 2016 for Malaysia’s top brand, Perodua, and the Japanese company would still be the world’s largest car maker.
Really, the industry ought to ignore unit figures altogether. This might reduce the incentive to fiddle with them, but mainly it would put more emphasis on profitability. Not all sales are equal: premium brands typically make several thousands of dollars for each vehicle; more basic brands only a few hundred, trucks, which are counted in most statistics, sometimes upward of $10,000.
Volkswagen’s historic hunger for volumes led it to sacrifice the margins of its namesake brand, which were just 1.6% outside of China for the first nine months of 2016. Chasing unit sales may have also created the corporate atmosphere that led to the 2015 emissions scandal, which is likely to cost the company more than $20 billion.
What matters more for investors is that Toyota’s stock-market value is more than twice that of Volkswagen’s. Never mind official industry statistics, Toyota is still by far the world’s largest car maker.