The wonderful aspect about companies competing in mass markets is there is never only one method to accomplish the task. There are a variety of reasons why companies do what they do and be examining different strategies, as an investor you can determine which one works for you the investor and you the consumer.
In an article by Norihiko Shirouzu of Reuters, he compared the strategies of GM and Toyota in relationship to the biggest market in the world for electric vehicles – China. GM and Toyota compete as the number one auto vehicle company in the world.
In North America, the world’s most successful hybird car is made by Toyota the Prius.
In China, there is competition at the high end from Tesla, the low end Mini EV and in the mid range VW and Renault and Chinese companies Nio and Xpeng.
The Mini EV is a no-frills vehicle made a joint venture of GM and SAIC and Wuling. This small vehicle costs less than $5,000. The Mini EV has cut corners that would not be allowed in the US and Europe for example it only has one air bag (for the driver), the car has an anti-lock braking system but no stability control technology which can cause tipping at high speeds. The vehicle is designed to be a commuter friendly in city traffic. The Mini EV is selling 100,000 a quarter. It should be noted, the Mini EV generates green car credits which helps offset the production of internal combustion engines.
Toyota has focused on the mid sized market and SUV, it makes more money, but is taking steps to produce a low cost EV vehicle recently teaming up with BYD – a Chinese battery and automaker in research and development.
Linking to dividend paying stocks, sales are good but how much money does the company make is the key. If a company goes low cost, then it has to do great volumes. If the company does lower volumes, then the margins have to be higher to make profits. There is never one method, but many combinations to take advantage of government incentives and what the market buys.
There are more questions than answers, till the next time – to raising questions.