Few companies have brands that are as ubiquitous and respected around the world as Toyota (NYSE:TM). Japan's largest automaker has built an enviable reputation for product quality and manufacturing efficiency – so enviable that many of its methods have become de facto auto industry standards.
Emulating Toyota's manufacturing methods has done wonders for companies like General Motors (NYSE:GM) and Ford (NYSE:F). But over the last few years, Toyota has faced a sea of troubles. First, a recall scandal dented its previously formidable reputation for quality. Then, just as it was beginning to recover, a massive tsunami in northern Japan decimated its supplier network and left some of its assembly lines idled for months.
But for all that, Toyota's resiliency has been impressive. The Japanese giant has bounced back in impressive style – and is once again challenging GM for global auto sales supremacy in 2012.
But is Toyota a buy? That's a more complicated question. To help answer it, I created a premium research report to help investors understand the challenges facing Toyota, and the opportunities presented by the company.
Following is an excerpt from the report. We hope you enjoy it.
The three areas that Toyota investors must watch
Area one: China
China is the world's largest auto market, one that's still growing. It's a market where there are still many consumers new to the global automakers, and plenty of room for brand preferences to be established – and shifted. Toyota had a solid position and a good reputation before the recent international dispute, but enduring anti-Japanese sentiments could lead to a long-term loss of ground. That would cost Toyota significantly: The company had expected to sell 1 million vehicles in China in 2012; that number now seems out of reach.
Area two: product
While Toyota still leads the important Consumer Reports quality rankings, some of its models have fallen behind in subjective comparisons. Many Toyota vehicles seem increasingly bland compared to much-improved rivals, particularly offerings from Ford, Hyundai (NASDAQOTH:HYMTF), Volkswagen (NASDAQOTH:VWAGY), and Nissan (NASDAQOTH:NSANY). Toyota is expected to present an all-new Corolla for the U.S. market soon. If it is not a significant step forward, and at least competitive with the likes of Ford's Focus, Toyota's market share could start to erode.
Area three: green technology
Toyota's reputation for green innovation sells a lot of cars; its Prius is easily the world's most visible (and best-selling) hybrid. It's a reputation that Toyota has worked hard to burnish, investing heavily in extensive in-house research and in key emerging companies in the space, including California's Tesla Motors (NASDAQ:TSLA). Among the global automakers, Toyota is rightly perceived as the "green" leader, but that is a position it must defend. If another major automaker appears to surge ahead of Toyota on the eco-car front, Toyota's sales and reputation could suffer significant damage.
Looking for more insight?
That was just a sample of The Motley Fool's new premium report on Toyota. If you're weighing whether the company is a buy or sell, this new report is an essential resource for investors seeking to understand the potential ups and downs of an investment in the electric-car manufacturer. Not only that, but the report also comes with updated quarterly guidance and dives into upcoming catalysts on the horizon. Just click here now to get started.
Fool contributor John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of Ford and Tesla Motors. Motley Fool newsletter services recommend Ford, General Motors, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.