Japanese automakers Toyota Motors (NYSE:TM) and Honda Motors (NYSE:HMC) continued to perform strongly in the U.S. with sales rising 41.5% and 30.9%, respectively, in September (y-o-y). Overall, vehicle sales in the U.S. remained strong and are on course to beat the already upped estimate of 14.5 million. Another winner in September was Chrysler which saw 11.5% growth. General Motors’ (NYSE:GM) and Ford’s (NYSE:F) sales were subdued on lower sales of pickup trucks as the demand declined due to high gasoline prices.
Toyota’s sales growth was boosted by Prius (whose sales more than doubled from the previous year), Camry and Corolla. Overall, the automaker’s sales are up 32% through September. Toyota relies on the U.S. for more than a fifth of its total vehicle sales while around two-fifths of Honda’s vehicle sales come from the U.S. The new Accord and Civic were the star performers for Honda, with both posting sales growth of 57% over the previous year. 
China A Worry
The strong September figures come as a major relief for the Japanese automakers who have been struggling in China of late due to tensions between the two countries over claims on the disputed islands. This has resulted in a wave of anti-Japanese sentiment in the country. Toyota’s China sales plummeted 40% in September. China accounts for approximately one-tenth of Toyota’s global vehicle sales.  Mazda sales declined by 35% while Honda has yet to report its numbers. Other non-Japanese auto companies such as South Korea’s Hyundai and Germany’s Volkswagen and BMW have benefited in turn.
However, as discussed in a previous article, declining auto sales for Japanese automakers will also impact job security of their Chinese employees. Consequently, the profitability of the joint ventures between Chinese and Japanese auto companies will also see an impact. Total trade between the two countries is estimated at $350 billion and with the Chinese economy already slowing down, it is in China’s best interest to resolve the matter as quickly as possible.  However, if tensions persist, the Japanese automakers are bound to lose additional sales as this issue is beyond their control, which could result in a downside to our price estimate.
We currently have a $90 price estimate for Toyota’s stock, which is about 15% higher than the current market price.Notes: