Volkswagen AG (ADR) (VLKAY), Toyota Motor Corporation (ADR) (TM), General Motors Company (GM): A Good European Stock to Consider

China is the company’s biggest market and also its biggest growth driver. VW holds a market share of around 20% in the country’s passenger car market. Its target is to achieve sales of 4 million in China by 2018. To realize this dream, it is building seven new plants and investing $16 billion through 2016.

In the U.S., Volkswagen’s main growth opportunity lies in diesel cars. This remains a small market, but with gasoline costs increasing, this segment could grow quickly.

Volkswagen is banking on its new cars to boost sales. It’s in the middle of introducing its seventh generation of Golf hatchbacks, and it’s likely to bring its new GTI model to North America in 2015. The company has launched the new Gran Lavida sedan in China, which resembles the Passat sold in the U.S. The company is also rolling out the refreshed Audi3 compact.

The MQB platform

Volkswagen is investing heavily in a state-of-the art modular architecture for its cars, known as the MQB platform. This will allow the company to manufacture any kind of vehicle of any shape and size from this common platform, which will reduce costs drastically. According to Morgan Stanley, the roll out of MQB may cost up to $70 billion over the next few years, but the savings that it can generate are mind-boggling. Morgan Stanley’s estimates call for a savings of $19 billion annually from 2019, which will boost gross margins to around 10%.

Last call

Volkswagen has shown its worth by withstanding the recession, which crumbled the European auto market. Now, with new cars and huge investments in growing markets like China, the company has set out to conquer the world. Whatever the outcome of that effort, VW’s growth seems inevitable. Investors should definitely consider owning a piece of this giant through its American Depository Shares.

The article A Good European Stock to Consider originally appeared on Fool.com and is written by Gaurav Basu.

Gaurav Basu has no position in any stocks mentioned. The Motley Fool recommends General Motors. 

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