The third quarter of 2023 saw a tale of two auto manufacturers, with Toyota continuing its strong performance while Tesla disappointed investors. Toyota’s shares have risen 14% since June 23, buoyed by the company’s robust global sales network and cost discipline. Tesla meanwhile saw its stock plunge over 9% in recent days due to underwhelming Q3 results that fell short of expectations. With legacy American automakers like Ford and GM hampered by UAW strikes, Toyota has been able to capitalize and extend its lead over rivals. As we look ahead, Toyota remains a top auto manufacturing pick, showcasing sustainable growth and profitability while trading at an attractive valuation compared to high-flying Tesla.
Toyota’s Sales and Profits Cruising Higher
According to an article on Seeking Alpha, Toyota reported strong Q3 sales and remains a top auto manufacturer. The article notes that Toyota outperforms Tesla on several metrics and has a strong global network. Toyota recently inked a next-gen battery deal to rival Tesla’s EV strategy and aims to stay at the forefront of manufacturing vehicles and related parts. The article also mentions that Toyota’s strong fundamentals make it a top auto manufacturing stock, and it continues to crush its competition despite global macro and geopolitical concerns. The article concludes that Toyota offers strong fundamentals and a good balance of growth and value, and it maintains a quant Strong Buy rating.
Tesla Hits Speed Bumps in Q3
Tesla’s Q3 earnings were disappointing, resulting in a drop of more than 9% in the company’s shares. The article notes that Toyota continues to outperform Tesla on several metrics, and has recently inked a next-gen battery deal to rival Tesla’s EV strategy. Toyota’s strong fundamentals make it a top auto manufacturing stock, according to the article. The article also notes that competition in the electric vehicle space is heating up, and that there are risks associated with investing in auto manufacturing stocks. Supply chain issues, economic headwinds impacted Tesla’s growth and margins
Toyota’s Competitive Edge
Toyota has several competitive advantages that have helped it become a global leader in the automotive industry. These advantages include:
- Quality and Reliability: Toyota has a strong reputation for quality and reliability, which is one of its most significant competitive advantages.
- Lean Manufacturing Process: Toyota’s lean manufacturing process allows it to produce high-quality vehicles at a lower cost than its competitors, giving it a significant edge in the market.
- Diversified Product Line: Toyota has a diversified product line that includes a range of vehicles, from small cars to trucks and SUVs. This allows it to appeal to a wide range of customers and gives it an advantage over competitors with a more limited product line.
- Global Presence: Toyota has a global presence, with manufacturing facilities in strategic locations around the world. This allows it to better understand local market conditions and improve its ability to serve customers in those markets.
- Partnerships and Alliances: Toyota has established partnerships with local manufacturers in many countries, which helps it better understand local market conditions and improve its ability to serve customers in those markets.
- Technological Expertise: Toyota has a history of relevant research and development, which has resulted in technological expertise that gives it a competitive advantage over its rivals.
- Cost and Price Competitiveness: Toyota has a capacity to compete based on cost and price via the Toyota Way, which includes the Toyota Production System. This allows it to keep its costs low and offer competitive prices to customers.
- Brand Popularity: Toyota has a high brand popularity, which gives it an advantage over competitors with less well-known brands.
In addition to the advantages I just listed, according to CNN, Toyota has recently announced that all of its electric vehicles sold in the US from 2025 will have charging ports designed to work with Tesla’s North American Charging Standard (NACS), rather than the Combined Charging System plugs currently used by automakers in the US. Toyota’s decision to adopt Tesla’s widespread charging standard cements its competitive edge by ensuring its future EVs can leverage Tesla’s accessible charging network. This forward-thinking strategy by Toyota will make its electric vehicles more convenient and easy to charge, further boosting its competitive positioning. Together with Toyota’s enormous scale, manufacturing expertise, brand loyalty and reputation for quality, this move to standardize on Tesla’s charging format reinforces Toyota’s leadership in the auto industry.
Despite these advantages, Toyota faces challenges such as competition from other automakers and reliance on the Japanese market. However, it also has opportunities for growth in the electric vehicle market and partnerships with complementary companies.