Toyota is On Top, but for how Long?

For the first time ever Toyota surpassed GM in quarterly world-wide sales. Most industry analysts have been calling for GM's dethroning for quite some time, so this is really no surprise. Unfortunately for Toyota being on top in vehicle sales is not an end unto itself. In the auto industry it isn't just quantity that counts, it is profitability. GM has always sold more cars than Toyota but they haven't been nearly as profitable in years.

I personally feel that the real growth story in cars over the next 5-10 years will be who can bring to market a compact, fuel efficient, ultra cheap car that can be sold to the burgeoning middle class in China and India. Who has the lead on that prototype? I'll give you a hint, it isn't Toyota and it isn't Hyundai. The leader is Tata Motors. The NYSE-listed (TTM), Indian auto maker announced plans for a car that retails for $2,500. And get this, their engineers have been trained in Toyota's manufacturing techniques! I agree it is an ambitious project but if Tata pulls it off they will be leaps and bounds ahead of GM and Toyota.

In retrospect however I think I may have missed out on one of the best paired trades ever. Check out the graph below assuming you had gone long TM and short GM 5 years ago today (click to enlarge):