China Success Could Add 12% To Toyota’s Stock Price

by Trefis Team
-4.26%
Downside
124
Market
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Trefis
TM
Toyota
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Toyota Motors  (NYSE:TM) sells over 10 million new vehicles globally each year. This makes it usually one of the top two selling car manufacturers in the world along with Volkswagen. Crucially, the company achieves these extremely high sales levels without a leading position in China, the world’s biggest car market. Since, car penetration levels in China are very low compared to those in the U.S. and Europe, there is significant room for growth. Toyota saw its sales in China grow by 8.2% last year resulting in close to 1.2 million unit sales. At this level, the Japanese auto maker has less than 5% market share in the region.

However, sales in China are expected to continue growing even if growth rates slow down. Over the next four years, we expect new vehicle sales in China to cross 30 million units annually. If Toyota captures around 12% of this increase in overall units sold, that would mean an addition of over half a million units sold annually, increasing its market share to close to 6%. Currently, we forecast Toyota’s units sold internationally, i.e. outside North America and Japan, to increase at a rate close to 6% over the next few years. These additional units sold in China could accelerate that growth rate to 7%. As the table below shows, this could result in our price estimate for Toyota increasing by 12%.

tm china

 

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Toyota Motor

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