Can Thailand, India, China Revive Toyota To $93 ?

Toyota Motors (NYSE:TM) has big plans for Asia. In India, it is in the process of developing cars to bridge the gap between its existing models in the country. For example, introducing subcompact cars or multi utility vehicles (MUV) targeting the price range between the lower priced Etios and the more expensive Corolla Altis or Innova. The gap is currently dominated by Honda City, Hyundai Verna and Volkswagen Vento in the country. These models will be developed keeping in mind not only the Indian consumers but also consumers in other emerging economies. Overall, Toyota plans to introduce eight new subcompact cars by 2015 designed specially for emerging markets. ^[1]

In Thailand, Toyota expects the total number of vehicles to be sold in 2012 to reach a record 1.2 million units, helped by government subsidies. Vehicle sales were subdued in 2011 due to the floods in the country which negatively impacted the supply as well as manufacture of vehicles. The Thai government’s decision to provide tax rebates to first time buyers has helped boost the automotive industry sales this year. There were provisions in the law which provided the subsidies only for cars whose engine size and price did not exceed the levels set by the government. As a result, Toyota expects the sales of its models Yaris and Vios to account for 50% of the total sales in 2012. Furthermore, Toyota expects the total sales in the country to jump 65% to 480,000 vehicles in 2012, up from the previous forecast of 450,000 vehicles.

The government subsidies are only valid till the end of 2012 but the auto manufacturers have requested the finance ministry to extend the subsidies till mid-2013 because certain customers might not be able to obtain the benefits due to a backlog of vehicles that might cause the delivery of vehicles to be after the eligible timeframe. If the government does extend the period, we could see another fantastic year for the automakers. ^[2]

Expanding in China

Recently, the automaker announced its plan to build a new manufacturing plant in China which will see its capacity to exceed 1 million in the country. Toyota has sold 442,500 vehicles in China in the first six months of the year, an increase of 24.9% on a y-o-y basis. With a greater focus on developing cars suited to the needs of the customers in emerging economies, Toyota aims to generate 50% of its total vehicle sales from emerging economies by 2015, up from 45% in 2011. ^[3]

We currently have a $93 price estimate for Toyota’s stock, which is about 20% above the current market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Toyota trying to make its presence felt in India and other emerging countries, July 10, 2012, economictimes.com [↩]
2. Toyota sees Thai vehicle sales at a record high in 2012, July 17, 2012, reuters.com [↩]
3. UPDATE 1-Toyota China sales rose 18.6 pct in June yr/yr, July 2, 2012, reuters.com [↩]