China helps VW be­come world’s best-sell­ing car maker

The Star Early Edition - - BUSINESS REPORT - Bloomberg

VOLKSWAGEN de­throned Toy­ota Mo­tor Cor­po­ra­tion last year to be­come the world’s best-sell­ing car maker for the first time, pro­pelled by surg­ing de­mand in China, which has been largely un­af­fected by the diesel-cheat­ing scandal.

Volkswagen (VW) sold a record 10.3 mil­lion ve­hi­cles in 2016, out­pac­ing its ri­val with a 3.8 per­cent gain from a year ear­lier. Toy­ota’s global sales, in­clud­ing its Hino Mo­tors and Dai­hatsu Mo­tor units, rose 0.2 per­cent to 10.2 mil­lion ve­hi­cles in 2016, the Ja­panese ve­hi­cle maker said yes­ter­day.

Tak­ing the global sales crown marks the bit­ter-sweet cul­mi­na­tion of an ag­gres­sive ex­pan­sion that former chief ex­ec­u­tive Martin Win­terkorn kick-started 10 years ago. While surg­ing de­mand in China and the pop­u­lar­ity of the up­scale Audi and Porsche brands’ line-ups boosted world­wide de­liv­er­ies, the VW mar­que lost mar­ket share in Europe, its sec­ond-big­gest re­gion, fol­low­ing rev­e­la­tions in 2015 that the com­pany ma­nip­u­lated diesel en­gines to pass emis­sions tests.

VW group de­liv­er­ies last year rose 12.2 per­cent in China, where the scandal is a non­is­sue, be­cause the car maker sells al­most no diesel ve­hi­cles there. Sales in Europe gained 4 per­cent, less than the over­all sec­tor, while the cri­sis fall­out hurt de­mand in the US and re­ces­sions cut sales in Rus­sia and South Amer­ica.

The in­crease in sales tax on small-en­gine ve­hi­cles is set to weigh on de­liv­er­ies this year in China, VW’s big­gest na­tional mar­ket, while in Ger­many, its home coun­try, the name­sake VW brand has started scal­ing back its large leas­ing fleet for em­ploy­ees, slow­ing growth. The mar­que ac­counted for al­most 6 mil­lion of global group de­liv­er­ies last year, and it’s tar­get­ing more than 3 mil­lion car sales in China this year.

Toy­ota’s sales last year lagged be­hind VW, mainly due to its per­for­mance in the US and China, with de­mand for its flag­ship Camry sedan wan­ing in the US and sales in China ex­pand­ing at a slower pace than the over­all mar­ket.

“The de­vel­op­ment of the US mar­ket is set to de­cide if VW can stay ahead of Toy­ota this year,” Sascha Gom­mel, a Frank­furt-based an­a­lyst at Com­merzbank, said. “If the Chi­nese and Euro­pean mar­kets con­tinue to be solid and the US mar­ket weak­ens as I ex­pect, VW might stay first in 2017 as Toy­ota has a larger ex­po­sure to North Amer­ica.”

Since his in­au­gu­ra­tion, Trump has with­drawn the US from the Trans-Pa­cific Part­ner­ship trade ac­cord, reaf­firmed a cam­paign prom­ise to rene­go­ti­ate the North Amer­i­can Free Trade Agree­ment in­volv­ing Mex­ico, and met with car mak­ers to per­suade them to keep pro­duc­tion within the US.

Toy­ota will in­vest $10 bil­lion (R134.31bn) in the US over the next five years, main­tain­ing its pace of spend­ing dur­ing the last half decade, join­ing other man­u­fac­tur­ers with high­light­ing projects in re­sponse to pres­sure from Trump to cre­ate jobs in Amer­ica.

Af­ter crit­i­cis­ing Toy­ota’s plans to build a Corolla plant in Mex­ico, Trump re­buked Ja­pan last week for send­ing the US hun­dreds of thou­sands of cars from what he said were “the big­gest ships I’ve ever seen.”

“Trump is a big­ger risk for Toy­ota than for VW, be­cause the Ger­man car maker has a small ex­po­sure to the US mar­ket,” said Ken Miyao, an an­a­lyst at Tokyo-based mar­ket re­searcher Carnorama.

As part of a far-reach­ing over­haul un­der new di­vi­sion chief Her­bert Diess, the VW brand has em­barked on a re­struc­tur­ing push out­side China and will boost its line-up of sport util­ity ve­hi­cles, the in­dus­try’s fastest-grow­ing seg­ment, where it lags be­hind Toy­ota and Gen­eral Mo­tors. – Bloomberg

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