Global dominance is an obvious aim of today’s integrated vehicle market. Unless one is nimble enough to efficiently adapt to market shifts and emerging regulatory obstacles, it may not be the badge of honor many revere it to be. As this complex global framework unfolds and expands toward newer growth areas such as lower cost regions, the idea of one or two OEMs growing in scope, breadth of production locations and technology dominance must be pondered.
Appointing a clear winner in the global automotive sweepstakes is folly. Many in the media have made much of whether Toyota or General Motors is larger in volume. Essentially, at over nine million annual units each OEM is focusing on demand diversification and the bottom line. Toyota cannot and will not dominate or influence every geography or market segment it chooses to focus on. In the same breath, General Motors must also be considered as it expands to lower-cost locations and adopts global platform structures to efficiently reach new markets. Neither can be a leader in every technology, segment or region it conducts business in. Today, both are roughly at 13.5 percent global market share (with affiliates) or about nine million units. In tandem, these titans control a quarter of our global light vehicle industry.
Interestingly, smaller OEMs continue to stretch for the 15 percent global share goal an apparent aim to reach a point of maximum global scale, demand diversification and performance affecting the bottom line. Volkswagen, the Renault/Nissan duo and even Hyundai/Kia have at some point in the recent past eyed this lofty volume level.
Over the past couple of decades, GM arguably continued to take its lumps in its key United States and Canada wheel house, while Toyota used its base in Japan as a flexible source to fill gaps while it localized production in several corners of the world. Call it circumstances or timing, GM grappled with the inflexible United Auto Workers (UAW) union and the Canadian Auto Workers (CAW) union, labor contracts, location rigidities in its European operations, difficult adaptation to structural changes (such as the early ’80s shift to front wheel drive unibody) and ill focused initiatives, all of which slowed real change. The list is long and varied. More important though, is a renewed focus on the constructs of the business. GM is making real progress in fixing its long list of difficult issues and is looking outwards for new opportunities.
GM’s deterrent to structural progress over the past three decades was Toyota’s opportunity for growth and financial success. Toyota’s expansion into new markets from a local production perspective, bringing key keiretsu suppliers with it, was ensuring controlled and constant growth while minimizing risk. The company also maintained a constant focus on component/system carryover or reuse for next generation programs so that every new initiative did not mean reinventing the wheel. Toyota’s industry approach is as much a revelation as the success itself.
The ability to efficiently meet the consumer’s needs, while meeting regulations and effectively utilizing assets human, monetary and fixed will determine success or failure. The slimmer industry margins over the past few years underscore this fine line.
Over the next decade, one could make a case for the dominance of Toyota and General Motors then the balance of the global OEMs. Peering beyond more than just total production volume or financial metrics, such as revenue or profitability, other factors must be considered. Industry differentiators, such as portfolio scope, sales and production footprint breadth/flexibility, global development framework, platform scale, power train capability, supplier relationships and speed-to-market /structural shifts, offer alternative perspectives.