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General Motors Company (GM): Could It Fall to Third in the World?

GM hopes the all-new 2014 Chevy Silverado will boost its global sales tally — but the company is still in danger of falling behind rivals. Photo credit: General Motors Company (NYSE:GM).

Could General Motors Company (NYSE:GM) – for decades, the world’s top-selling car company – actually fall to third place soon?

It’s not impossible. General Motors Company (NYSE:GM) held the global sales crown as recently as 2011, but lost it to Toyota Motor Corporation (ADR) (NYSE:TM) last year. That wasn’t a surprise: Toyota was on a roll after a couple of years of troubles, and GM lost market share in the U.S. while it was waiting for new products.

Toyota and GM have traded the lead back and forth for several years. But now there’s a third contender for the global crown. With a quarter of 2013 already in the books, it’s running close behind General Motors Company (NYSE:GM) – closer than executives at General Motors would probably like.

VW’s big push for global domination
That company is Volkswagen, the German giant that has ridden a strong presence in China to the top tier of the global sales charts. Now, VW has ambitions of grabbing the crown for itself before long.

GM’s 3.6% increase in global sales kept it ahead of VW by about 90,000 vehicles in the first quarter. But VW has closed the gap significantly over the last couple of years – and it may well pass General Motors Company (NYSE:GM) soon.

VW has said repeatedly that it aims to be the world’s largest-selling automaker by 2018. It has already made tremendous progress: Mostly a regional player for a long time, VW got to the China auto party early, and built a huge presence by choosing the right local partners and following a savvy product strategy.

GM leads VW in overall sales in China, but about half of GM’s China sales are low-margin commercial vans. VW’s share of the passenger-vehicle market is bigger: 19.5% to 10% for GM last year. And its profits were substantially bigger, too, in China and elsewhere: VW’s pre-tax profit in 2012 was $15 billion, best in the world. General Motors Company (NYSE:GM)’s? $7.9 billion, less than Ford Motor Company (NYSE:F)‘s .

Why is VW so profitable? First of all, it has a novel approach to product development that allows for significant cost savings, increasing profit margins on each car sold. Second, it has a strong luxury brand in Audi, which has become China’s top-selling luxury brand with almost 30% of the market. Luxury cars are significantly more profitable than mainstream models.

Meanwhile, GM wants a different crown now
While VW has set its sights on the global sales lead, GM CEO Dan Akerson has said that he’s not focused on the sales crown now. Instead, he aims to make General Motors Company (NYSE:GM) the world’s most profitable automaker.

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