Toyota (NYSE:TM) raised its forecasts for fiscal 2008 to 9.85 million vehicles, up 5.2% from the number of cars it expects to sell for its year ending March 31. That would mean the company would pass GM (GM) for the No. 1 spot worldwide.According to MarketWatch, November production at the Japanese company was up sharply.
Toyota’s forecasts are built on several assumptions that may not be true. The first is that it can pick up market share in developing countries like China. GM and VW are the market leaders there through joint ventures with local car companies. These two companies can leverage dealer networks and production economies of scale that Toyota does not have. Perhaps more important. Chinese auto firms are trying to take share from foreign companies. The country’s largest domestic car operation SAIC announced that it is buying smaller peer Nanjing Automobile Group.
Competition in China’s auto market may make growth by outside companies harder that it has ever been.
Toyota also has to hope that it can hold its roughly 15% market share in the US, and that sales in the troubled market will not fall too sharply in 2008. There is no guarantee that either will work to Toyota’s advantage. Some estimates put next year’s car sales in the US as low as 15 million units, down from over 16 million this year. That means the No.1 Japanese car company could see units sold fall off as much as 150,000. That number assume that Toyota can keep its piece of the market. US car companies are in trouble, and there is no reason to believe that they will not increase incentives to maintain low inventories. That could make Toyota’s job in America much harder.
Toyota also faces trouble in its home market. Car sales in Japan have been weak and local companies, especially Nissan and Honda (HMC) have been locked in a battle with Toyota to increase sales in an environment which is not even enjoying modest growth.
Toyota may be projecting a big year but "if wishes where horses, all the beggars would ride."
Douglas A. McIntyre
It’s Your Money, Your Future—Own It (sponsor)
Are you ahead, or behind on retirement? For families with more than $500,000 saved for retirement, finding a financial advisor who puts your interest first can be the difference, and today it’s easier than ever. SmartAsset’s free tool matches you with up to three fiduciary financial advisors who serve your area in minutes. Each advisor has been carefully vetted and must act in your best interests. Start your search now.
If you’ve saved and built a substantial nest egg for you and your family, don’t delay; get started right here and help your retirement dreams become a retirement reality.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.