It looks like 2015 may be the year that Volkswagen stops looking up Toyota's tailpipe and overtakes the Japanese automaker as the largest car company in the world.
In 2014, only 90,000 units separated the German and Japanese companies. But the race may not be decided until the final lap, as underscored by the results of the first quarter, which were released by the Wolfsburg-based company on Wednesday.
“Moderately better than expectations, most of it from China,” said Philippe Houchois, an automotive analyst at the Swiss bank UBS, adding, “The VW brand remains weak.”
That Toyota is number one globally is not the most important thing to company president Akio Toyoda. His message to Toyota employees is not to chase sheer volume, but to build cars that are fun to drive – though he doesn’t want to see any dramatic loss of market share.
At Volkswagen, however, there is no satisfaction to being the second-largest company. Sales are forecast to increase by up to four percent in 2015 and rose more than 10 percent in the first quarter. Favorable exchange rate conditions drove sales to €52.7 billion ($59.1 billion).
The Japanese are positioning the Lexus brand to compete with Audi outside of Germany.
“Naturally, expectations remain dependent on the development of the economy, which is presenting challenges for the industry in many parts of the world,” Volkswagen’s Chief Financial Officer, Hans-Dieter Pötsch, told analysts, adding that the commercial vehicle sector could still be affected.
Still, Volkswagen improved its operating margin in the first three months of the year to 6.3 percent compared with 6.0 percent during the same time period last year.
At Toyota, a restrained investment policy is one reason the company expects record profits in fiscal year 2014, which ended in March.
Toyota is reporting an increase in income of 5.1 percent to ¥27,000 billion ($227.2 billion) and an operating profit of ¥2,700 billion, which translates to profit margins of 10 percent. In contrast, Volkswagen invested massive amounts on a major product offensive, modernizing its existing range of vehicles while introducing new ones. Tangible investments increased to €2.1 billion from €1.6 billion compared to the same period last year.
Differences between the two companies continue in the premium sector. The VW subsidiaries, Audi and Porsche, drove profits with Audi achieving a profit margin of 9.7 percent in the first quarter while Porsche hit a lofty 15.8 percent.
Toyota’s luxury brand, Lexus, put the brakes on profits as it fell further behind Audi. The Japanese are positioning the brand to compete with Audi outside of Germany.
The rapid drop of the yen since 2012 certainly has much to do with earnings at Toyota, which produces more vehicles for export outside Japan than Honda or Nissan. After suffering under the strong euro, Volkswagen now profits from its weakness.
A glance at the world map also shows the differences between Volkswagen and Toyota, particularly in North America. It’s a market that continues to cause headaches at Volkswagen, specifically with its core brand. For Toyota, on the other hand, North America has become its most important market.