Toyota (TM) Expects a Record Year — Maybe

It is amazing how large multinational car companies can see into the future and predict their sales with certainty. Toyota (NYSE: TM) says it will sell 8.48 million cars and light trucks next year. That would be a 20% improvement from this year. Reaching that goal seems improbable, mostly because of the global economy.

Toyota’s numbers would put it at about the same level industry experts believe General Motors (NYSE: GM) and Volkswagen will reach in 2012. GM’s sales could continue to rise because of the low levels they reached as the company went through bankruptcy in 2008. Volkswagen will add Porsche to its brand stable. Also, the German manufacturer does well in the world’s largest car market — China.

However, there are several reasons that none of the three companies will sell many more than 8 million cars and light trucks next year. Sales in Europe could be substantially undermined by a deep recession that is likely to begin there, if it has not already started. The sovereign debt trouble has caused cutbacks in government stimulus support for expansion in several economies, which include Greece, Spain, Portugal and Italy.

Sales in the U.S. should remain strong, if the economic trouble in Europe does not reach America, and if Congress extends tax cuts and unemployment insurance. The extension of both of those programs is in doubt. Americans have kept the new cars they bought most recently for an average of between five and six years, which is a record. The replacement process should help keep sales stable.

The most difficult market to predict is China. Car sales there have risen sharply to more than 16 million. China passed the U.S. as the largest single market two years ago. Even China’s economy has slowed, though, and car and light vehicle sales have stalled. A further attrition in the expansion rate of China’s economy should cause a drop in consumer activity.

Toyota’s growth forecast is based to some extent on its ability to open plants in Japan that were shut down by the March earthquake. But production increases will not matter much if there is a softening in global demand.

Douglas A. McIntyre