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Volkswagen Outpaces GM in China in First-Half 2014

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In the race to become the highest selling foreign automaker in the world’s largest automobile market, Volkswagen AG (VLKAY - Free Report) has again emerged the leader. Notably, this is the second consecutive year in which the company is poised to beat its peers in China. The automaker recorded sales of over 1.8 million vehicles in the first half of 2014 in the nation, marking an 18% year-on-year improvement.

General Motors Co. (GM - Free Report) trailed close with record high sales of 1.73 million units in China, up 11% over the first half of 2013. Toyota Motor Corp. (TM - Free Report) , the leading automaker in terms of global sales volume in 2013, lagged Volkswagen and General Motors in China. Another major global automaker, Ford Motor Co. (F - Free Report) posted record sales of 549,256 vehicles in China in the first half of 2014. This translates into a 35% surge from 407,474 vehicles sold in the first half of 2013.

General Motors was the leading automaker in the nation for over 8 years, before Volkswagen usurped its position in 2013. The latter seems on track to remain the top player in China this year as well, though a lot can change in the next 6 months. As China is the world’s largest automobile market, sales in the nation play an important role in determining the leading global player.

Volkswagen is targeting sales of over 3.5 million vehicles in China this year. This target will be easily achieved if the automaker continues to sell at the current pace.

To boost sales in China, Volkswagen is constructing 2 new plants in the nation and increasing its dealer network to over 3,600 outlets from 2,395 in 2013. The car maker also plans to sell over 100 vehicle models by 2018, increasing significantly from 63 models in 2013. Volkswagen is investing over 20 billion euros ($27 billion) in China.

General Motors is also investing heavily in the nation. It is building 5 new plants in China, which will be operational by the end of 2015 and will triple its exports from the nation. The company plans to boost annual production capacity by 20% to 5 million vehicles by 2015 and by 65% till 2020.

In Apr 2014, General Motors announced that it plans to invest $12 billion in China by 2017. This investment will be utilized for expanding the manufacturing capacity of its SUV, crossover and luxury car offerings in the country. The company will be launching 60 new or refreshed vehicles between 2014 and 2018 and 11 new utility vehicles in China in the next 5 years. 

General Motors expects sales in the Chinese market to grow 8% to 24 million vehicles in 2014. It also projects the overall Chinese market sales to reach 33–35 million new units annually by 2020.

General Motors and Ford currently have a Zacks Rank #3 (Hold), while Toyota carries a Zacks Rank #4 (Sell). Volkswagen meanwhile, has a Zacks Rank #5 (Strong Sell).

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