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Toyota Motor Corporation (ADR) (TM), General Motors Company (GM): Which Automaker Rules the Globe by 2020?

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Toyota Motor (TM)With vehicle sales in the U.S. surging, the race to crown this year’s No. 1 automaker is off to a fast start. It comes down to three players: Toyota Motor Corporation (ADR) (NYSE:TM) , which reclaimed the title from General Motors Company (NYSE:GM) in 2012, and Volkswagen AG (ADR) (PINK:VLKAY). Volkswagen was brazen enough to claim it would top all automakers globally by 2018. The recession threw in an initial speed bump, but Volkswagen has since had three strong years and continues to build momentum globally.

With one fourth of the year in the books, let’s break it down and see who has the early lead. Let’s also look long-term and see if Volkswagen could end up No. 1 as soon as 2018.

By the numbers
Toyota Motor Corporation (ADR) (NYSE:TM) takes the early lead, reporting sales of 2.43 million vehicles in the first three months of 2013. That was good enough to narrowly top GM, which reported 2.36 million, and Volkswagen AG (ADR) (PINK:VLKAY), at 2.27 million. Comparing those numbers to the same time period in 2012, you can see a slightly different trend. Toyota Motor Corporation (ADR) (NYSE:TM) sales declined 2.2%, while GM and Volkswagen surged 3.6% and 5.1% respectively.

We can quickly name one large reason behind Toyota’s decline — China. Its sales dropped 13% from a year earlier. After a territorial dispute between China and Japan, Toyota Motor Corporation (ADR) (NYSE:TM) and Honda vehicle sales tanked in the region, and haven’t fully returned. Ford Motor Company (NYSE:F), GM, and Volkswagen AG (ADR) (PINK:VLKAY) were all beneficiaries of this, and quickly ate up the market share.

Racing forward
Throughout the rest of this decade, we’re going to witness a drastic change in the emerging markets and how their sales stack up against mature markets. Europe, once a global bright spot in vehicle sales, is projected to remain flat or have minimal growth — maybe reaching 15 million vehicles by 2020. The U.S. is expected to grow sales to about 20 million vehicles. Meanwhile, In addition to China’s 19.3 million vehicles sold last year, it’s expected to grow its sales by the size of Europe’s current market – roughly 12 million vehicles.

U.S. and China are key for this decade
Success in the U.S. and China will largely determine which automaker finishes on top by 2018. This bodes well for GM and Volkswagen, which both enjoy dominant positions in the Chinese market. GM sells a wide range of vehicles, and Volkswagen’s Audi – the company’s high-margin luxury line – is beloved by the Chinese.

Both are gunning to increase their presence in the rapidly growing region. Volkswagen announced it will spend nearly $13 billion investing in seven new plants in China — five of which start construction this year. GM also aims to grow its production capacity, adding four plants over the next three years.

One thing GM has over Volkswagen AG (ADR) (PINK:VLKAY) is that it already has a dominant position in the U.S. market. That said, Volkswagen has made strides here recently, selling 580,000 vehicles in 2012 – up 31%. That’s still a long shot off of the company’s goal to top 1 million, which it will need to reach to have a shot at becoming the global leader.

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