By on February 15, 2012

The massive wave of recalls that brought some 9 million Toyotas back to the dealers, amidst a frenzied coverage by a sometimes hysteric media, did less damage to the brand than imagined. A study from North Carolina State University shows that Toyota’s safety-related recalls that began in 2009 had little to no impact on how consumers perceived the brand.

Dr. Robert Hammond, assistant professor of economics at NC State, launched the study because he wanted to see how consumers respond to recalls. Hammond looked at used-car markets as a measure of how much Toyota owners were willing to accept when selling their vehicles – and how much used-car buyers were willing to pay for them.

Hammond found that there was very little effect on what consumers were willing to pay for a Toyota. Hammond found that the average price of affected vehicles declined by approximately 2 percent relative to comparable, unaffected vehicles (such as similar Honda models). That 2 percent decline is within the statistical margin-of-error for the study. What’s more, the effect was temporary: The first Toyota recall was in November 2009, and the apparent decline in vehicle price had leveled out by January 2010.

Initial reports of drops in resale value turned out to be premature. In 2011, Toyota and Lexus were back on top in the Kelley Blue Book rankings.

Hammond did a similar analysis of Audi vehicles that were recalled due to similar acceleration concerns in 1986. The impact there was more significant. Audi showed an average price slide of over 16 percent relative to similar, unaffected vehicles over the course of six months.

The paper, “Sudden Unintended Used-Price Deceleration? The 2009-2010 Toyota Recalls” will be published in the Journal of Economics and Management Strategy.

 

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26 Comments on “Can’t Bring Me Down: Toyota Brand Unaffected By Recalls...”


  • avatar
    Steven02

    The recalls were only in the news for one reason, a huge crash involving a police officer that killed people. But other Toyota recalls barely make the news.

    Look at the Volt fire problem. It never happened to a customer. It never hurt anyone. Yet, it made huge news.

    The NHTSA is now looking into some possible fire problems in Toyota’s because a power window motor or switch that has been reported 6 times in the field. Granted, it sold something like 800k models during that period.

    Toyota has recalls just like any other auto manufacture. It seems that their recalls don’t seem to affect the perception of the brand while recalls of other brands do affect their perception.

    • 0 avatar
      LectroByte

      I thought the police officer fatal crash was from extra floor mats added to a loaner Lexus by the dealer, and the mats ended up jamming the gas pedal? Tragic but I don’t see that as an issue with the brand itself.

      • 0 avatar
        highrpm

        Also, if I’m remembering the Volt fire drama correctly, there were a few incidents of Volts catching on fire in homeowners’ garages while being charged.

      • 0 avatar
        niky

        The much-publicized first fire started in a garage which the Volt shared with a 15-year old electric Suzuki Samurai conversion. Guess which one was the more likely culprit?

        The other fire, the cause is unknown, but c’mon, one fire that might or might not be versus how many fires (and a few outright explosions) for gasoline cars, so far?

      • 0 avatar
        doctor olds

        No Volt fires have occurred in vehicles in consumer use.

        One fire resulted in a Volt, following a NHTSA crash test, in which the car was tipped upside down after a severe side impact, then parked for 3 weeks with the battery left charged before it caught fire.
        With great effort, GM & NHTSA were finally able to create two similar incidents, though only resulting in smoke and sparks with no fire, by smashing a Volt battery by itself, poking a hole in it with a metal rod and letting it sit, still fully charged.
        None of these incidents reflect real world concerns, thus NHTSA closed their investigation. A consumer Volt crash would result in a GM team de-powering the battery after notification by OnStar that a crash had occurred. Volt is one of the safest cars on the road.

  • avatar
    NormSV650

    I love this gobblety-goop of mixing used with new car sales data to come to a conclusion. Not to mention using Toyota vs Honda as Honda was No. 1 in recalls in 2011.

    KBB 2011 top rankings of new Toyotas do not match it’s 3rd place performance behind. No 1 GM and No. 2 VW. Bringing out redesigned 2012 Camry in December 2011 and slapping .9% financing or lease deals is just an example. Lexus isn’t even in the picture and getting smoked in lux car markket.

    Audi annual sales peak back then was almost half of what Toyota did in January 2012. Of which Toyota bumped the lucrative rentals sales accounting for almost 50% increase over same time last year. But they say it’s only temporary.

    I’ll wait for the published article.

    • 0 avatar
      RRocket

      I’d hardly call Lexus getting “smoked” in the luxury segment since last year was the FIRST time in 11 consecutive years that Lexus wasn’t the sales leader. And they only sold ~50,000 fewer cars than BMW despite the car/part shortages caused by the tsunami.

      Maybe when the other marques equal that streak of 11 years, then you can properly use the term “smoked” and “isn’t even in the picture” when referring to Lexus and the luxury market.

  • avatar
    minneapolis_lakers

    Haters gonna hate.

    Toyota must be doing something right :)

  • avatar
    ponchoman49

    I would call being displaced by GM and VW, a drastic increase in rental sales and far more serious recalls an affect on this arrogant company. There all new not so really new Camry and the not competitive outdated Corolla are down on sales compared to years past in further proof. It takes years to change perceptions with the ignorent buying public and the over dramatic coverage of the Volt which was a non issue as far as people being injured and little Toyota coverage despite the fact that they were going on a montly car recall rampage with serious issues like rotting out truck frames, door fires, acelerator issues that take the car out of control, shattering sunroof’s etc is further proof.

    • 0 avatar
      84Cressida

      You mean getting displaced by GM and VW when Toyota lost months worth of production in an act of nature beyond their control, then lost MORE production later on in the year by another act of nature? You mean the VW that relies on growth from buying out other car companies and the GM who counts Joint Ventures they own minority stakes in as wholly their sales?

      Let’s see how Lt. Dan Akerson would deal with a crisis like Toyota had to go through this year with the tsunami. Considering that bonehead can’t even open his own mouth without shit pouring out of it, it’s safe to say GM would be completely inept and just hide in the closet, or jsut blame the media and Toyota for all their problems like they always do. And Toyota’s arrogant, yet GM is isn’t? Whatever you say, Lutz.

      The 2012 Camry is new, not “not really so new”, it’s new. Brand new Hybrid powertrain, brand new exterior styling, new interior, new chassis that is lighter and safer, new Entune system, and far more. And it smokes the “new” 2013 Malibu in available safety features, weight, fuel economy, feature content, and actually has an engine with more than 4 cylinders.

      You are just another clueless GM shill, especially since you still list the acceleration hogwash as a factor of Toyota’s “failings”. Newsflash: NASA and NHTSA found no defect, sorry to burst your bubble (not really, I love bringing you guys back down to Earth).

      BTW, I still want my tax dollars back.

  • avatar
    minneapolis_lakers

    I’m very bullish about Toyota:

    1. Onslaught of new products– new Avalon, ES, LS, IS are all coming soon. Camry and Lexus CT are doing phenomenally well in both the U.S. and China.
    2. Supply chain almost fully recovered from the earthquake/tsunami/Thai flood
    3. U.S. economy is on the upswing
    4. Recovering share price – market cap is now above 120 billion USD
    5. Yen is weakening after BOJ’s asset buying program and may weaken further

    The Japanese thrive when their backs are against the wall — that’s when they bring their A game. Underestimating Japan is a very dangerous business — just ask Kublai Khan, the Tsarist Baltic Fleet, or JGB shorting hedge fund managers how well it worked for them.

  • avatar
    Dynasty

    This is actually really simple to understand y’all are making it way too complicated.

    Imagine you are in a relationship with someone. And for years they always do what they say they are going to do, show up on time, dinner is ready when you get home, etc. Then suddenly, they mess up and not only is dinner not ready, but it hasn’t even been started. This is one incident. Is it really going to affect your perception that much?

    Now onto example two. You start dating someone new. She flakes often, shows up late when not flaking. But damn is she sexy. So the relationship continues. The first couple times she flaked, she had a great excuse: ‘My grandma broke her hip’ and promises to make it up. Some time passes, maybe three weeks. Then she does it again, “Oh, I thought we had plans tomorrow not today”……

    Toyota has had a few slip ups, but they’ve been spread out thin, and they had already solidly established their reputation here. Audi on the other hand, really did not have much of a presence in the US until their unintended acceleration stuff in the 80s. So it only makes sense their brand perception was much harder hit than Toyota’s.

    Or even better, look at VW through this lens.

    • 0 avatar
      Monty

      Brilliant analogy.

      I’d love to hear the comparison if the date was GM instead of Audi!

      • 0 avatar
        Dynasty

        If the date were GM instead of Audi?

        All promises, lots of apologizing for not delivering, and 85% attempts to do it right the next time.

        But you keep forgiving her, because you know deep deep down inside she really has it in herself to do it right.

  • avatar
    VanillaDude

    Toyota buyers don’t see these things because their eyes are rolled up into the back of their heads as they stagger single-file into dealerships with their arms held straight out in front of them saying, “must – buy – Toyota, must – buy – Toyota”

    • 0 avatar
      84Cressida

      Yeah, ok. And Domestic car buyers are whiny, little sore-losers who love to trash Toyota for every single thing while shouting from the roof-top “buy ‘muriccan” and that the media is attacking their precious American cars unfairly while they brag that their ’04 Cavalier has made it to 33,000 miles without a problem.

  • avatar

    Lots of my friends knew that the Toyota witchhunt had no ground in reality. I bought my UAW-made bailoutmobile because it was more fun to drive than competing Toyota’s offering. Also, it’s a convertible, and I’m 46. If I put more premium on a dependable transportation appliance, I would definitely buy Toyota. And I say that because I examine data at True Delta carefuly, while ignoring the lies in the media.

    • 0 avatar
      niky

      I believe the public in general realized that the witch-hunt was just that. This wasn’t helped by the fact that at least one publicized SUA incident was completely faked.

      Whereas a fire hazard… that’s something they have no control over, and which could affect even non-senior citizens… even if it has never happened to a single customer.

  • avatar
    Robert Fahey

    Still waiting for a single YouTube video of a sticky Toyota pedal. Despite all the publicity, despite a ubiquitous product, and despite a condition both visible and repeatable in the safety of a driveway — nobody could get a single example on camera. Yet I can find entire episodes of the Hudson Brothers Razzle Dazzle show.

  • avatar

    With the Audi comparison, aren’t we conveniently leaving out the Audi 5000 that not only had acceleration problems, but also caught on fire? My uncle’s caught on fire during Thanksgiving dinner, it was awesome!

  • avatar
    Junebug

    “Hudson Brothers Razzle Dazzle show” really? wow – I’m there dude!

    Seriously, We have a 2008 Toyota Highlander that we love, no issues and still looks great going on 4 years now. OK, I do detail cars and I keep much better care of it than most folks. But, as a detail guy I can say that Toyota products do hold up better than other cars of the same age.

  • avatar

    Obama and Bush get reelected for second term despite of running record deficits, waging unfunded wars and launching unfunded populist programs. Obama even received Nobel Peace prize for that. And how about senators doing nothing but inflicting harm to people who elected them and getting re-elected term after term for decades. That’s a human nature. People are religious even if they deny it.

    • 0 avatar
      niky

      Stop the presses… we have a psychic in the house! Obama is going to win in 2012!

      Curiously… what war did Obama start? The only one I can think of is Libya, and even that one was more NATO than the US, since Obama backed out of that one…

  • avatar
    Lokki

    I think that this situation is pretty easy to read. Toyota has built decades worth of reputation-building cars. Were they all perfect or even great? No, but generally a Toyota has been a safe bet. GM used to have this reputation (as the safest bet for a decent car) but they’ve spent my entire car-buying lifetime destroying it. The law of inertia applies in both cases. It will take a long time for Toyota to become perceived as a bad gamble and an equally long time for GM to become a good one. Having said that, I really believe that the Volt’s lack of sales is more price-related than safety-based. To choose a Volt you have to be someone who believes that its technology or its Americanism are worth roughly $10K over comparable competition from the Leaf or the Prius along with being someone who can afford the car and and who has a situation where the car is useable.

    Hyundai is doing well now, but it’s taken 20 years to recover from the Excel fiasco. VW’s legend seems to have survived their spotty quality record fairly well, but at one point they led their Japanese competitors in the US and now are really only a niche player. Finally, we come to FIAT whose legendary rust and quality caused them to withdraw from the US market all-together. I’m very interested to see whether their history has an impact on sales. Right now, I don’t think that the 500 is a valid test. It’s soooo small that I tend to see it as almost as much of a niche vehicle as the Volt, although with perhaps more potential for rental fleet service.

    • 0 avatar
      doctor olds

      @Lokki- +1!
      While it pleases me to see Toyota get their “turn in the barrel”, surpassing all other brands in number of recalls and getting lots of negative media attention, the unintended acceleration issue was not really much of a product issue. They do have over twice tthe rate of UA complaints as GM, though.

      With production capacity back, this year should show whether Toyota can re-capture the share they lost over the last couple of years. Their peak share of 17% was in 2009, and they lost half a point at 16.5% in 2010, before falling off all the way to 14.1% share in 2011.


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