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

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Since his inauguration, Trump has withdrawn the US from the Trans-Pacific Partnership trade accord, reaffirmed a campaign promise to renegotiate the North American Free Trade Agreement involving Mexico,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