Toyota regains strength but continues to face stiff competition globally

Article by Anita Panait, on September 13, 2012

Despite Toyota Motor Corp.’s latest resurgence in the global automotive market, the Japanese carmaker is expected to encounter difficulties in returning to its former worldwide glory. Toyota, headed by chief executive Akio Toyoda, is on the verge of a powerful comeback.

The company looks poised to recapture its crown as the world’s best-selling carmaker this year, and it $140 billion stock-market value is larger than the combined value of next two biggest automakers, Volkswagen AG and Honda Motor Co.

Despite these achievements, investors remain reluctant in putting their money in Toyota, which prevents its shares to regain their value before the financial crises hit them. In addition to that, the competition has been getting tougher in the recent years.

Aside from the renaissance of US rivals like General Motors Co., Toyota also has to be wary of South Korean carmakers like Hyundai Motor Co. Toyota’s price-to-sales ratio, which represents the value investors place on each dollar of revenue, mirrors concerns about the carmaker’s ability to hike profits, especially since its quality lead against US and South Korean rivals has gotten smaller.

Takashi Aoki, a fund manager at Mizuho Asset Management Co., told Bloomberg in a phone interview that Hyundai has become a formidable rival since the carmaker is better recognized by the world now. Aoki remarked that the global auto market now views Hyundai as being a competitive company against Toyota.

US brands GM and Chrysler, both of which survived a bankruptcy scare years ago, also managed to chip away at Toyota’s quality lead against them.

In fact, GM obtained its best scores in this 2012 edition of J.D. Power & Associates annual study of new-car quality, the same indicator that helped establish Toyota and Honda's reputations in the United States for car reliability. Chrysler logged the largest score improvement in the annual survey.

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