Will Tough Times Knock Toyota Off Its Feet?

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Once the world’s largest car manufacturer, Toyota (NYSE:TM) has fallen on tough times. Share value has dropped over 4 percent this month following a string of bad news out of Asia and the United States.

An ongoing territory dispute between China and Japan have pushed sales down to their lowest level in years. Anti-Japanese sentiment has led to a 48.9 percent sales decrease in China. The country accounts for about 12 percent of Toyota’s global sales. Initially, hopes were high that protests and production cuts would only last as long as the Golden Week holiday, but the trouble has persisted.

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According to Reuters, a key Toyota and Lexus dealer operator in the country said, “The biggest question now is how permanent the damage Toyota and other Japanese brands sustained is. It’s too early to say one way or the other, but we are a bit concerned.” In some cities, protests have led to violence and the destruction of vehicles.

Honda (NYSE:HMC) is witnessing similar problems because of the dispute in China. The company has reported a 40.5 percent drop in sales in the country. Honda pulls about 20 percent of its sales from the country.

Toyota’s woes continue in the United States. The U.S. is the second biggest market for Lexus, Toyota’s luxury brand. The company announced that after being dethroned as the best-selling luxury brand in the U.S. in 2011, it is behind their sales target for 2012 as well. Toyota’s target is 46 percent higher than actual deliveries. Mercedes is set to lead the luxury market this year, growing 13 percent through September compared to 2011.

Meanwhile, Ford (NYSE:F) posted 35 percent sales gains in China for September compared to last year, a record month for the company. While BMW and other German brands have gained the most — BMW sales up 55 percent — American car manufactures are taking the opportunity to expand market share. General Motors (NYSE:GM) and its joint ventures in the country also set a sales record for the month.

The outlook for Toyota got even gloomier when on October 10 it issued a massive worldwide recall of over 7 million vehicles. About 2.5 million vehicles in the United States are affected, where domestic competition in the hybrid space is heating up. Ford just launched an advertising campaign promoting its new C-Max vehicles targeted directly at Toyota’s Prius line.

Toyota finished the trading week at $74.67 per share.

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