Toyota Could Overtake GM in the US Retail Sales Race

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Comments: 0

October 18, 2007

 

Toyota is not only on the cusp of solidifying its position as the # 1 global automotive sales leader, they are also very close to overtaking General Motors (GM) as the “retail” sales leader in the United States. In recent years, Toyota has overtaken what was the Chrysler Group, then parent DaimlerChrysler and more recently Ford to be the second largest vehicle manufacturer in the US, behind GM. Since the late 1990s, there has been a paradigm shift in relevance of what used to be the Big 3 in the US as they have just become the Detroit 3.

 

During that time, Ford never seemed to have recovered from the Ford Explorer/Firestone tire debacle. Chrysler under Daimler never was able to sustain traction in the market resulting in the August divesture of Chrysler to the private equity group Cerberus. And finally GM has continued with more restructuring and downsizing resulting in the present day reordering of the Big 3 in the US market. GM and Ford each have lost over 1 million sales annually since 2000.

 

Table 1: US Sales through September (Source: Automotive News)

 


Company

2007

2000

1

GM

2,934,093

3,855,591

2

Toyota

2,001,646

1,235,280

3

Ford

1,971,565

3,330,325

4

Chrysler*

1,578,823

1,979,586

5

Honda

1,193,520

904,381

6

Nissan

813,049

587,492

* Excludes Mercedes Benz

 

For convenience the sales of the top six manufacturers are presented from the start of the year through September for 2000 and 2007 (Table 1). This data alone shows the reordering and the severe drop in sales of the domestic producers during that period.

 

Now for my argument that GM may lose their #1 “retail” position in the US. Personally, I believe retail sales are the best indicator of a company’s performance and acceptance in the market. The sales numbers reported by manufacturers on a monthly basis cannot be trusted to accurately reflect the true sales to every day consumers who spend real money and make a decision to purchase a new vehicle. These numbers are aggregates of true consumer retail sales and fleet sales. Fleet sales can be those to governments and large customers such as rental car agencies. The largest percentage of fleet sales are those to Hertz, Avis and other rental agencies who purchase the best deal from manufacturers specifically GM, Ford and Chrysler. For this very reason I have traditionally not relied on the domestic’s monthly sales numbers as a metric for prosperity. There numbers are skewed and not reflective of the true market acceptance of their product or to be used to judge future earnings.

 

Historically the domestics have used sales to rental car companies to prop up their sales for a number of reasons. Those being: Labor agreements that make it more economical to keep the plants running and loose less money by selling vehicles to fleet than close plants, fleeting low margin, high gas mileage cars to offset high profit gas guzzlers to meet CAFE requirements, lost revenue and investor confidence when plants are closed, and there is public relations drama associated with losing a top positions in the sales ranking.

 

Using publicly available fleet data for cars and trucks I contend the sales race for real customers is a lot closer than one would think from just looking at the monthly sales reports. Traditionally the import brands only fleet a small percentage of their total sales.

 

Table 2: 2007 Retail Sales Estimates through September 2007


Company

2007

1

GM

2,053,865

2

Toyota

1,861,531

3

Ford

1,380,096

4

Honda

1,133,844

5

Chrysler*

1,057,811

6

Nissan

691,092

* Excludes Mercedes Benz

 

As the above Table 2 illustrates, Toyota is within reach of capturing the top “retail” sales slot in the US as they are approximately 200,000 sales behind GM. To frame it another way, GM and Toyota almost command the same percentage of the US market. Also, it is very possible that Honda could become the #3 US auto company if Ford's restructuring does not prove successful.

 

I will not go out on the limb and say Toyota will do it, but they are within grasp of upsetting what was once the world’s largest industrial corporation in their home market not too many years ago. Then again, it was only a decade ago and there were predictions Ford would take over become the position form GM. For that reason I will just suggest the possibility.

 

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