For the last several decades Toyota Motor Corporation (NYSE:TM) and Honda Motor Co Ltd (NYSE:HMC) (TYO:7267) have dominated the global automobile market. Yes, during this time frame, Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM) sold similar volumes of cars but Toyota and Honda have been more profitable and have largely owned reliability and prestige rankings. Other companies, such as BMW and Mercedes, have done well in certain niches, but across segments, Toyota and Honda have demonstrated the most complete dominance in terms of sales and more importantly profits. Now, with Toyota suffering a rash of recalls, Honda having been slammed for quality control flaws and design missteps, and both companies facing increasingly intense competition, the end of Japanese dominance of the global automobile industry may be at hand.
To be certain, neither Toyota Motor Corporation (NYSE:TM) or Honda Motor Co Ltd (NYSE:HMC) (TYO:7267) will be going away in the near future. Both companies are still enjoying strong sales and profits. Still, the global “hegemon” of the two Japanese automakers may now be shifting towards a “multi-polar” world with numerous large and competitive automakers vying for both market share and profits.
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In the past neither Ford Motor Company (NYSE:F) nor General Motors Company (NYSE:GM) struggled to sell large volumes of cars, however, both companies frequently had to rely on profit killing discounts to clear car lots. Poor designs, reliability, and quality control forced the American automakers to essentially sell their cars at a loss. Now the so-called Big 3; GM, Ford, and Chrysler, are enjoying strong sales and rebounding profit margins. Perhaps more importantly, the Big 3 have managed to garner numerous awards and high ratings on many of their cars.
Chrysler is still lagging behind, due to its older product line up but in recent months has managed to produce solid profits after years of losses. The company appears to be turning the corner and has begun to launch several new eye-catching products, such as the new 2013 Dodge Viper and a well-received “Imported from Detroit” marketing campaign.
Meanwhile, both Ford and General Motors Company (NYSE:GM) have launched numerous well-received cars. Ford has found success with its new Ford Focus compacts and the redesigned Ford Escape. The newly launched Ford Fusion (Mondeo in some markets) is already generating a lot of buzz. General Motor’s Chevy Cruze has turned into a best-seller. In 2011 the Cruze sold 230,000 in the United States, gaining groundon the Camry which sold almost 310,000 cars. Ford Motor Company (NYSE:F) and GM are also doing well internationally. GM is now the number one selling car in China, while Ford has been aggressively expanding its sales with its Ford Fiesta, an international hit.
While progress is being made quality still remains an issue for the Big 3. In the last few days Ford launched a recall literally telling drivers to “park their car.” General Motors has also launched several recalls, though they have been less severe then recent recalls by Ford and Toyota. On the flip side Toyota has also been hit with a long series of recalls and a perceived cover up for numerous engine problems circa 2009.
American automakers are not the only ones taking on the major Japanese automakers. The Hyundai motor group, which consists of the Hyundai and Kia brands, has seen its sales increase in recent years. The company is now the forth largest automobile manufacturer, trailing only Toyota, General Motors Company (NYSE:GM) , and Volkswagen AG (PINK:VLKAY) (PINK:VLKPY). The company has also seen growing profits and profit margins. The groups sales grew from approximately 5.75 million sales in 2010 to 6.3 million in 2011 and are on track for another record breaking year.
Meanwhile as the competition surges Toyota Motor Corporation (NYSE:TM) and Honda Motor Co Ltd (NYSE:HMC) (TYO:7267) continue to have problems of their own. The 2012 Civic, launched exclusively in the North American market was all but universally panned for poor quality, a noisy interior, and ugly design. Consumer Reports saw the Honda Civic’s rating drop from a very solid score of 78 in 2011 to 63 in 2012, while Forbes named it among one of the worst flops of the year.
Toyota’s cars have been slipping in numerous rankings. The company has launched only a few new models and major redesigns in recent years, and their outdated models are having trouble keeping up with the new models from their competitors. According to U.S. News compiled rankings in 2012, out of 20 car models (including hybrids) Toyota placed six models in the top 3. Four models failed to break even the top 20. Meanwhile, Ford Motor Company (NYSE:F) placed 9 of its 9 of its sixteen cars in the top three and had only one car, the Explorer SUV, fall out of the top 10, placing at number 16. Honda placed 4 of its 11 models in the top three, however the other seven models failed to place higher than 13. Even the once acclaimed Honda Civic failed to break the top twenty models for compact cars.
This is a far cry from only a handful of years ago, when Toyota Motor Corporation (NYSE:TM) and Honda Motor Co Ltd (NYSE:HMC) (TYO:7267) dominated reviews and nearly every ranking. While only a few short years ago it appeared to be a competition solely between Toyota and Honda, now the two are losing ground to other competitors.
Can the two Japanese car companies rebound and start producing the well-reviewed cars they were once famed for manufacturing? Both plan to launch major redesigns of their flagship cars, such as the Honda Civic and Toyota Corolla, in coming months. If these cars turn out to be hits it could help the two companies rebound and stave off the advancement of their rivals. If these cars flop, however, their respective manufacturers might find themselves in hot water and starting to lose market share. Either way, with numerous other automobile companies improving the designs and quality of their vehicles, and with the brand damage already done, it looks like we are entering a multi-polar world where multiple manufacturers will have an opportunity to enjoy strong profits and sales.