General Motors (GM) Could Be Overtaken by Volkswagen Soon

Things might get rough soon for General Motors (GM), the second largest automaker in the world. While the Detroit-based automaker was able to momentarily claim the crown as the world's top automaker last year after Toyota (TM) was hit by tsunami-related losses, things are looking increasingly bleak for 2013. One quarter into 2013, German automaker Volkswagen has edged closed to its near-term goal of selling ten million vehicles annually.

Daily Chart
Volkswagen is currently the third largest automaker in the world, and has thrived despite ongoing weakness in the European market. During the first quarter, Volkswagen sold 2.27 million vehicles, a year-on-year increase of 5.9%. Sales in China soared 21.3%, keeping the company on track to sell over three million vehicles in the world's largest auto market. Meanwhile sales in North America rose 14.9%. Both Volkswagen's sales in China and North America were boosted by its acquisition of luxury sports car brand Porsche last year. Although Volkswagen first quarter sales numbers were impressive, its March sales came in flat. The company delivered 864,000 vehicles last month, an anemic 0.2% gain from a year earlier. However, just as General Motors and Toyota have struggled in Europe, Volkswagen posted a 5.9% slump in European sales, with a 7.2% plunge in its home turf of Germany. The only bright spot in its European results was a minor, positive gain in Russia. Auto sales across the continent are currently at the lowest point since the mid-1990s due to the endless sovereign debt crisis that has gripped the area. Unemployment across Europe has hit a record-high average of 12.0%. Despite these macro challenges, General Motors has increased its investments in Europe, recently pledging to invest $5.2 million in its loss-making German brand Opel over the next three years to support new models launches. Ironically, General Motors appointed the former head of Volkswagen's China business, Karl-Thomas Neumann, to oversee the turnaround effort at Opel. Analysts believe that if Volkswagen can maintain its current momentum, it could easily top 9.5 million vehicles sold worldwide by the end of the year. For 2013, Toyota expects to sell 9.91 million vehicles in 2013. However, Toyota management has stated that the company's ultimate goal is to increase sales at a more manageable rate to insure better quality control. Toyota was hurt by widely publicized vehicle recalls between 2009 and 2010, after consumers reported problems with stuck accelerators and defective power windows and air bags. In 2012, Toyota finished the year with 9.75 million vehicles sold, GM came in second with 9.29 million vehicles, and Volkswagen sold 9.07 million. Toyota currently trades at 14.8 times forward earnings, GM at 6.8, and Volkswagen, which is available in the OTC markets to U.S. investors, trades at 6.17. That actually makes Volkswagen the fundamentally cheapest of the bunch, and if it can stay on track, it actually has much higher growth potential than GM or Toyota. Other News About GM GM to Invest $5.2 Billion in Germany's Opel Should GM double down on a loser? GM's Path to Shareholder Freedom Will an independent GM be stronger than before? Other Stocks in the News Is F5 Networks' Fumble a Buying Opportunity? Are F5's weak earnings symptomatic of problems in the network market? The Three Cs of Investing in Indonesia How can American investors invest in Indonesia? Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Apr 18, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2020. Content published with author's permission.

Posted in ...