Not only is Volkswagen riding out the worst of the Dieselgate scandal, they are on track to steal Toyota’s crown as the world’s biggest car maker.
Read anything about Volkswagen in recent months and you would gain the impression that the company was on the ropes. Production numbers from the first third of 2016 paint a different picture, however. So what’s the actual story?
Global Car Sales, Jan-Apr 2016
- Volkswagen – 3,361,600
- Toyota – 3,271,970
- GM – 3,146,667
“For the first four months of the year, [Toyota] finds itself some 90,000 units behind Volkswagen,” says Forbes’ Bertel Schmitt. That’s right, VW is selling more cars than Toyota. “More tellingly, Toyota is on a protracted downward trend. Compared to the same period of last year, the company’s deliveries are down 2.8%.” If the trend continues through the summer, the people’s car maker will indeed finish the year as the world’s most popular marque.
Unsurprisingly, being the world’s biggest motor manufacturer involves shifting a lot of metal. How much? Lets take a look.
Global Car Sales, Jan-Dec 2015
- Toyota – 10,080,000
- Volkswagen – 9,930,000
- GM – 9,800,000
If Schmitt’s projections pan out, Toyota and Volkswagen are set to swap places with roughly the same numbers. GM will remain largely static in the number three slot, not good for a company that used to be number one with a bullet, but not bad for a company that was recently bankrupt.
This is all highly provisional, mind: Volkswagen were quickest out of the traps in the first third of 2015, but Toyota still came out on top once the last of the Christmas turkey hit the bin.
Outside the Echo Chamber
So from where does the disparity between expectation and reality stem? Schmitt identifies a widespread confirmation bias in US-centric reporting which routinely overemphasises Dieselgate’s potential effects upon VW’s business. It would seem that the average American is not hugely interested in what VW has been up to, with US sales down a mere 5.1% since the scandal broke.
Then there is a bigger picture. The North American car market might be one of the biggest but Volkswagen is a minnow in a big pond, the USA contributing a paltry 5% towards VW’s worldwide sales. A much bigger slice of the pie, 35-40% of VW’s total revenues, comes from the East. “Last year, it was China, and not Dieselgate, that kept Volkswagen back,” notes Schmitt. “This year, it may be China, not Dieselgate, that turns Volkswagen into the world’s largest automaker.”
Peer beneath the headline numbers and all is not terribly rosy in the Wolfsburg garden. Steph Willems at The Truth About Cars notes, “Profit at Volkswagen passenger cars fell 86 percent to €73million, down from €514 million last year.” That leaves VW operating on a gross margin of 0.3%, barely enough to warrant getting out of bed. Fortunately, overall VW Group profits were up, Bentley, Porsche, Audi and Skoda (plus perpetual loss makers Seat and Bugatti) pulling in a combined €3.44billion.
There is also the small matter of Volkswagen having to stump up €16.2billion, a combination of fines to the US Government and restitution for American buyers of errant diesels. VW USA must also contend with a brace of lawsuits and North American dealerships are becoming increasingly mutinous as its Eurocentric line up continues to struggle and sales of the US Passat tank. In the face of a small and diminishing market share and withering costs, one wonders how long Volkswagen will choose to persist in the US market.
A Pyrrhic Victory
And then there’s Toyota. Never a company to sit on its collective hands, Schmitt claim’s the Japanese giant is significantly investing in streamlining capacity and making their processes even leaner. “If Volkswagen ends the year as World’s Largest Automaker, it will also close the books on a year of huge losses,” he says, “while number two Toyota would be busy counting all the money it made.” Ouch.