All Eyes are on The Company as it Seeks to do to Toyota
Volkswagen has Renewed the term of its CEO, and all Eyes are on The Company as it Seeks to do to Toyota what Toyota did to GM by 2018. Can Winterkorn Indeed win his Most Coveted Prize?
While Toyota is running hard towards its goal to sell 7.7 million units this year, Volkswagen is pushing the accelerator towards its 10 million unit sales target by 2018. “Whether Volkswagen is able to do so (beat Toyota by 2018) or not, it will certainly centralise the efforts of Volkswagen towards ensuring high sales and profitability,” said Christoph Stürmer, research director - OEM Strategy, IHS Automotive.
With the kind of growth plans Toyota has in its mind, Volkswagen may even find it tough to overtake the Japanese giant in unit sales. Stürmer adds, “I believe Toyota will stay at the top of charts in the automobile industry after 2018 as well. But what will work for Volkswagen will be that it can from then work towards a new ‘2025’ vision; which may again be to displace Toyota.” Moreover, Toyota is dealing with more challenges. The sales back home are expected to fall by over 17% in 2011; wherein it will be able to sell 1.3 million units in Japan. Toyota will still produce close to 3.1 million units in 2011; down 5% as compared to the 3.28 million units produced in 2010. The move will expose the Japanese auto major to threatening foreign exchange risk and Toyota will try to stay afloat by cutting costs and reviewing production processes. But the price to earnings ratio of Toyota at a level of 20.15% not only beats the 11.02% figure for the sector but also the 13.21% for Volkswagen.
The global automotive industry is all set to go through a major shift wherein Asian economies like India and China will attract more attention. Anticipating the trend, both Toyota and Volkswagen have earmarked huge investments in these markets. On the one end, Volkswagen’s Chakan plant is gathering pace in the production cycle while Toyota’s unit for the Etios project is helping the company reach new skies on the volumes front. Clearly, it will be the high volumes market where we will see both players fighting it out through to the last lap. While Toyota will like to fight it on the product front as it no longer has the superior technology image (after the 2.3 million unit recalls it recently announced), Volkswagen will be pushing its products on the design front. But since these markets would play the decisive role, Toyota’s climb-down in terms of revenues and focus on volumes would play to its advantage. At least for 2018, Toyota may indeed have the last laugh. For Winterkorn, it may indeed be more prudent to focus on alleviating margin pressures and getting his strategy for India and China right. If he manages this, ‘2025’ could see Volkswagen tip the scales, even though he may have to watch that one from the sidelines.
While Toyota is running hard towards its goal to sell 7.7 million units this year, Volkswagen is pushing the accelerator towards its 10 million unit sales target by 2018. “Whether Volkswagen is able to do so (beat Toyota by 2018) or not, it will certainly centralise the efforts of Volkswagen towards ensuring high sales and profitability,” said Christoph Stürmer, research director - OEM Strategy, IHS Automotive.
With the kind of growth plans Toyota has in its mind, Volkswagen may even find it tough to overtake the Japanese giant in unit sales. Stürmer adds, “I believe Toyota will stay at the top of charts in the automobile industry after 2018 as well. But what will work for Volkswagen will be that it can from then work towards a new ‘2025’ vision; which may again be to displace Toyota.” Moreover, Toyota is dealing with more challenges. The sales back home are expected to fall by over 17% in 2011; wherein it will be able to sell 1.3 million units in Japan. Toyota will still produce close to 3.1 million units in 2011; down 5% as compared to the 3.28 million units produced in 2010. The move will expose the Japanese auto major to threatening foreign exchange risk and Toyota will try to stay afloat by cutting costs and reviewing production processes. But the price to earnings ratio of Toyota at a level of 20.15% not only beats the 11.02% figure for the sector but also the 13.21% for Volkswagen.
The global automotive industry is all set to go through a major shift wherein Asian economies like India and China will attract more attention. Anticipating the trend, both Toyota and Volkswagen have earmarked huge investments in these markets. On the one end, Volkswagen’s Chakan plant is gathering pace in the production cycle while Toyota’s unit for the Etios project is helping the company reach new skies on the volumes front. Clearly, it will be the high volumes market where we will see both players fighting it out through to the last lap. While Toyota will like to fight it on the product front as it no longer has the superior technology image (after the 2.3 million unit recalls it recently announced), Volkswagen will be pushing its products on the design front. But since these markets would play the decisive role, Toyota’s climb-down in terms of revenues and focus on volumes would play to its advantage. At least for 2018, Toyota may indeed have the last laugh. For Winterkorn, it may indeed be more prudent to focus on alleviating margin pressures and getting his strategy for India and China right. If he manages this, ‘2025’ could see Volkswagen tip the scales, even though he may have to watch that one from the sidelines.
Source : IIPM Editorial, 2012.
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An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
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