Carmakers move to a more localised model

No longer comparing sales with those of their chief rivals, the world’s leading automakers are increasingly saying they no longer pursue global sales volume outright. These days they are more subtle about their sales initiatives, preferring to tie them to customer product preferences in specific locales.

“We see our global sales volume as a result of customer-driven practices,” says Ryo Sakai, Toyota’s department general manager for global communications in Japan. “We have to consider key risk factors for our main markets, including falling oil prices, local economies and what customers in those international locations are looking for.”

Hence, each market has its own unique purchase factors. “Toyota has enhanced strength and autonomy of regional operations so that [we] can quickly meet local needs,” adds Mr Sakai.

Toyota takes the lead

The world's biggest automaker, Toyota sold around 10.15 million vehicles globally in 2015, compared with 10.23 million in 2014. Volkswagen was the second biggest with 9.93 million vehicles, followed by General Motors with 9.8 million.

This year, Toyota says it will be implementing major structural changes designed to make better cars, enhancing the strength and autonomy of regional operations, while emphasising genchi-genbutsu (on-site learning and problem-solving) in training personnel. The company also wants to promote autonomous region-based management.

The goal is to create a company built around product-based groups. “Doing so will enable the dissolution of barriers within the company and eliminate unnecessary coordination work, thus helping to ensure that all team members’ efforts will be leveraged toward the purpose of making ever-better cars and developing a talented workforce,” says Mr Sakai.

General purpose

GM has also stopped chasing global sales volume, preferring to reinvest in global business initiatives to drive 20% or higher return on invested capital through investments in world-class vehicles and leading technology.

“GM continued to grow in 2015 as our focus on the customer and successful new vehicle launches more than offset the challenging conditions in South America and the curtailment of our presence in certain markets such as Russia,” said GM president Dan Ammann in January. “In 2015, GM's cars, trucks and crossovers were leading automotive sales in China and its North American and South American regions.”

The company began pursuing Chinese business in the mid-1990s under former president Jack Smith. It was a market waiting to be tapped, as China did not have much private car ownership, just government-owned vehicles. Last year, China accounted for more than one-third of GM’s global vehicle sales, some 3.6 million vehicles. GM expects its Chinese sales to reach 5 million vehicles or more by 2020, representing 3% to 5% annual growth. The company’s top five global markets are China, the US, Brazil, the UK and Canada.

A change at Chevrolet

Chevrolet, GM’s largest brand, announced in July 2015 that it would invest $5bn in strengthening its business in global growth markets by developing a new vehicle family to meet rapidly changing needs of customers.

“With a significant majority of anticipated automotive industry growth in 2015 to 2030 outside mature markets, Chevrolet is taking steps to capitalise on that growth,” said Mr Ammann. “Strengthening Chevrolet’s position through this major investment is consistent with our global strategy to ensure long-term profitable growth in the markets where we operate.”

As part of its global expansion, GM also stresses key automotive alliances. For example, Renault and GM co-operate in the light commercial vehicles segment. The two companies began the alliance in 1996 with the first-generation Renault Master and Opel/Vauxhall Movano vans, expanding to include the Opel Vivaro and Renault Trafic models. The vehicles are jointly developed, but are independently sold through separate brand distribution channels. The Vauxhall and Opel-branded Vivaro products are built exclusively at the Vauxhall plant in Luton, UK, for sale across Europe.

In Europe, GM’s Opel/Vauxhall unit’s sales were its highest in four years at more than 1.1 million vehicles, despite a strategic departure from the Russian market. Total European vehicle market share increased for three consecutive years to nearly 6%, according to GM.

VW's tough task

Volkswagen Group is keen to retain the number two global sales spot it earned in 2015. “Obviously we will continue to work hard to convince as many people as possible of just how great our products are. But size must never be an end in itself,” says Fred Kappler, head of group sales at Volkswagen. “Ultimately, whether we sell 100,000 vehicles more or less than our main competitors is not what counts. What matters is the quality of our earnings, the persuasiveness of our ideas and products, and the sustainability of everything we do.” 

The group is banking on what it calls its Strategy 2018 initiatives, which will extend to Strategy 2025 in an initiative to be unveiled later this year. The extension is expected to involve intelligent mobility services and further digitalisation.

“We need a technological and strategic realignment for the coming 10 years,” says Mr Kappler, meaning even more future-oriented and profitable products. The company’s plans for global expansion and investment remain solid.

“We are not going to make the mistake of economising on our future. On the contrary, we are focusing our investments even more systematically on the technologies of tomorrow and the realignment of our model range,” says Mr Kappler.

Next year, VW tech leaders say the company will increase spending on alternative drive technologies by about €100m. VW also will expand brand digitalisation globally. “In addition to the €12bn [in investments], our joint ventures in China are planning expenditure of about €4.6bn in 2016. As a result, our investments in our largest emerging market remain stable at a high level,” says Mr Kappler.

Meanwhile, VW has been hampered by the fallout from last year’s diesel emissions scandal which led to the resignations of several top officials and staff members.

In stepping down as chief executive, VW's Martin Winterkorn said last September he was “not aware” of any wrongdoing on his part. Michael Horn, CEO and president of Volkswagen Group of America, resigned this year. He had served as chief of VW’s US affairs since January 2014. Whether this series of events will have a negative impact on VW's global reputation, and therefore sales, remains to be seen.