Could Volkswagen Release Toyota’s Grip on the Auto Industry?

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Toyota (NYSE:TM) is, through the first half of this year, the largest automaker in the world. But that’s not news; Toyota has been the leader for a couple of years now, consistently moving more units than Volkswagen Group (VLKAY.PK) and General Motors (NYSE:GM). The news is that Volkswagen has narrowed the gap considerably.

While Toyota set to work ensuring that its cars were at the top of its quality game after an ugly bout of bad publicity stemming from the unintended acceleration issues a few years ago, Volkswagen put its growth engine in overdrive — especially in China, which is considered to be one of the world’s most valuable vehicle markets. That edge allowed VW to move 4.97 million vehicles in January-June, up 5.9 percent from the same period a year ago, Reuters said. That excludes Scania and MAN sales, VW’s heavy truck units.

That figure could have been better if not for the immense struggles that Volkswagen has been finding here in the States. Slow sales, low model turnover, and fewer offerings than GM or Toyota have hurt Volkswagen’s nameplate sales in North America. However, the brand is flourishing abroad, and in China, it sold 3.27 million vehicles in the region last 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,” Yoshiaki Kawano, an analyst at IHS Automotive, told Reuters. IHS is expecting VW to sell 9.91 million vehicles this year, and has Toyota pegged for 9.47 million. VolkswagenPassat

GM, meanwhile, has been grappling with its enormous recall situation, which will in all likelihood put a ferocious dent in its profitability this year, though sales at the automaker haven’t seemed to experienced the stumble one would expect with so many potential safety issues being made public. It, too, has used China as its trump card, with strong sales growth offsetting the lukewarm European market and any downturn in North America.

GM delivered 1.4 percent more vehicles through the first six months to 4.92 million cars and trucks. Toyota, however, hasn’t enjoyed the same kind of success as VW or GM in China, largely due to anti-Japanese sentiment that the Chinese feel. Honda and Nissan face similar challenges in the country, but VW and GM (and others) have been largely unaffected and have actually benefited from the slow sales of its Japanese counterparts. Volkswagen’s sales leapt 18 percent to more than 1.8 million, beating out GM’s 11 percent increase to 1.73 million. Toyota’s 12 point increase was admirable, but still entirely incomparable at 465,000 units.

Moving ahead, Volkswagen will be counting on a more upscale Passat sedan, due out later this year in Europe. A new Golf family in the U.S. is also an integral part of VW’s North American strategy. Toyota, meanwhile, is still surfing the sales waves created by its new Highlander SUV and the RAV4 crossover.

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