Toyota And BMW Forecasts Surge

Toyota (NYSE: TM) is supposed to be a company in trouble. BMW, on the other hand, is the car industry’s darling. But both raised their sales forecasts for the balance of the year. Either this is a sign that the global vehicle manufacturing business is unexpectedly expanding, or the two companies are outliers.

BMW has done well so far in 2011, mostly due to sales of its new 5-Series sedans. The average price of a BMW is well in excess of $50,000. The demand for the German company’s products may be a sign that the affluent end of the car market has done well and will continue to do so. BMW said profits from its most recently reported quarter doubled to $3 billion.

Toyota said it lost 108 billion yen in the second quarter. That compares to a profit of 212 billion yen in the same period last year. Toyota’s sales have been hampered by plant closings due to Japan’s earthquake in March. Many of its facilities are expected to be back online later this year. Demand for Toyota’s vehicles, especially the hybrid Prius, are strong in the U.S. Toyota’s market share has dropped to 10.5% of the American market from 15.1% last year. Before the company’s recall problems, U.S. market share for Toyota was 18%. Despite the drop, it is still the second largest car company in the world based on unit sales, just behind GM (NYSE: GM).

Car sales have slowed considerably in the U.K., EU, U.S., and Japan so far in 2011. China sales have even begun to move in a more tepid fashion compared to the rapid pace they set in 2010. China is now the world’s largest car market, accounting for about 16 million units a year. A slowdown in the global economy is expected to challenge car manufacturers’ success in these markets.

It would be a mistake to view the Toyota and BMW forecasts as part of a broader improvement in the industry. BMW’s success shows that the rich are still rich. Toyota’s raised forecast shows that even a natural disaster cannot permanently hurt the prospects of a company that still makes, based on many industry polls, the best cars in the world.

Douglas A. McIntyre