Toyota Motor Corp. (TM, Financial) has been facing a number of threats that could potentially influence the market performance of the company, but apparently, the shares of the company remain uninfluenced by such factors. The reason behind this market performance is that there are sufficient positive factors to offset the influence of all the negative factors surrounding the company. The positive factors include strong sales and strong prospects for sales in the upcoming financial periods. Toyota has shown a commendable market performance toward the end of 2012. The shares of the company currently hold a buy recommendation from a number of analysts. The Street has given the company a buy rating with a B+ ratings score. The following chart exhibits the trend of share price of the company for the past year:
It can be observed from the chart that Toyota’s share price was at its lowest at the start of 2012 and it remained volatile for most of the year. However, a steep rise can be observed toward the end of 2012 and the start of 2013. This rise in the share price can be attributed to the strong sales announced by the company in December.
Strong Sales in 2012
Toyota’s sales increased by 9% in December as the sales of its most popular models Prius and Corolla, improved in multiple markets. The US auto industry as a whole showed very positive results at the end of 2012. The results show that the sales of the car industry grew by 13.4% in 2012. Therefore, this was the best year for the auto industry since 2007. This high growth has set up foundation for high expectations for the New Year as well. Other factors that give concreteness to the positive expectations for the next year include the recovering economy and increased accessibility of credit. As 2012 was the best year since the advent of the subprime crisis, it can be said that the economy is recovering at a steady pace and it can be expected that the economy will continue to be on the same path throughout 2013 as well.
Toyota’s direct competitor, General Motors Company (GM, Financial) was declared the winner in the race of car sales as the company sold 2.5 million vehicles in the US in 2012. The officials at GM are highly optimistic regarding even better sales in 2013. The expectation for increased sales in 2013 by GM is also backed up by the recovering economy and improving credit availability.
Global Recalls
Toyota has been required to conduct global recalls of its vehicles multiple times, and despite the recalls, Toyota has exhibited very strong market performance. The company is facing technical issues with a number of its vehicles, including some of the most popular cars such as Corolla and Prius. Toyota has recently announced a major global recall of 2.77 million vehicles due to these technical problems. The recall involves 14 models including Prius and Corolla.
Territorial Dispute in China
Another negative factor surrounding the company is the rebounding sales in the Chinese market due to territorial dispute. Although the company witnessed high sales in the US market, the sales fell in the Chinese market due to the dispute. It was disclosed that Toyota’s sales in China fell 15.9% in December 2012 as compared to the same month in the previous year. For the whole year, the sales in China fell 4.9% to 840,500 vehicles. China was previously a very strong market for Toyota and this fall is the first annual decline for the company in the Chinese market since 2001. Toyota was not the only automaker that took the hit due to the territorial dispute. Other companies that were influenced include Nissan Motor Co. (NSANY) and Honda (HMC, Financial). Nissan’s sales fell by 5.3% and Honda’s sales fell by 3.1% in the Chinese market.
After the analysis of Toyota’s strong market performance for 2012, strong sales in the US market, positive ratings score, and some negative factors surrounding the company, in my opinion, investors should hold their investments in the company. Although Toyota holds a positive rating from numerous analysts, the worsening situation in the Chinese market cannot be ignored completely. There is very high expectation for the rise in auto sales in the US market and that may keep the financial performance of Toyota growing; however, the decline in Chinese sales may reflect negatively on the financial statements of the company.
It can be observed from the chart that Toyota’s share price was at its lowest at the start of 2012 and it remained volatile for most of the year. However, a steep rise can be observed toward the end of 2012 and the start of 2013. This rise in the share price can be attributed to the strong sales announced by the company in December.
Strong Sales in 2012
Toyota’s sales increased by 9% in December as the sales of its most popular models Prius and Corolla, improved in multiple markets. The US auto industry as a whole showed very positive results at the end of 2012. The results show that the sales of the car industry grew by 13.4% in 2012. Therefore, this was the best year for the auto industry since 2007. This high growth has set up foundation for high expectations for the New Year as well. Other factors that give concreteness to the positive expectations for the next year include the recovering economy and increased accessibility of credit. As 2012 was the best year since the advent of the subprime crisis, it can be said that the economy is recovering at a steady pace and it can be expected that the economy will continue to be on the same path throughout 2013 as well.
Toyota’s direct competitor, General Motors Company (GM, Financial) was declared the winner in the race of car sales as the company sold 2.5 million vehicles in the US in 2012. The officials at GM are highly optimistic regarding even better sales in 2013. The expectation for increased sales in 2013 by GM is also backed up by the recovering economy and improving credit availability.
Global Recalls
Toyota has been required to conduct global recalls of its vehicles multiple times, and despite the recalls, Toyota has exhibited very strong market performance. The company is facing technical issues with a number of its vehicles, including some of the most popular cars such as Corolla and Prius. Toyota has recently announced a major global recall of 2.77 million vehicles due to these technical problems. The recall involves 14 models including Prius and Corolla.
Territorial Dispute in China
Another negative factor surrounding the company is the rebounding sales in the Chinese market due to territorial dispute. Although the company witnessed high sales in the US market, the sales fell in the Chinese market due to the dispute. It was disclosed that Toyota’s sales in China fell 15.9% in December 2012 as compared to the same month in the previous year. For the whole year, the sales in China fell 4.9% to 840,500 vehicles. China was previously a very strong market for Toyota and this fall is the first annual decline for the company in the Chinese market since 2001. Toyota was not the only automaker that took the hit due to the territorial dispute. Other companies that were influenced include Nissan Motor Co. (NSANY) and Honda (HMC, Financial). Nissan’s sales fell by 5.3% and Honda’s sales fell by 3.1% in the Chinese market.
After the analysis of Toyota’s strong market performance for 2012, strong sales in the US market, positive ratings score, and some negative factors surrounding the company, in my opinion, investors should hold their investments in the company. Although Toyota holds a positive rating from numerous analysts, the worsening situation in the Chinese market cannot be ignored completely. There is very high expectation for the rise in auto sales in the US market and that may keep the financial performance of Toyota growing; however, the decline in Chinese sales may reflect negatively on the financial statements of the company.
