Toyota's recall undermines reputation in China
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Toyota is likely to face a trust crisis in China following a massive recall of several models over problems with sticking accelerators in the United States, Europe and China, industry analysts have said.
Tianjin FAW Toyota Motor Co. Ltd. will recall 75,552 RAV4 sport-utility vehicles from Feb. 28 due to a potential flaw in their accelerator pedals, the Sino-Japanese joint venture announced Thursday.
The recall follows similar announcements by Toyota in the United States and Europe, where sales of eight popular models have also been suspended. The Japanese automaker has already announced the recalls of 2.3 million vehicles in the United States, 1.8 million in Europe, and 270,000 in Canada over faulty gas pedals.
The automaker is meanwhile recalling some 5.55 million vehicles in the United States and Canada over problems with loose floor mats, of which a large proportion are believed to overlap with those recalls for the gas pedal problem.
As a result, the actual number of vehicles subject to recalls over faulty gas pedals or floor mats is estimated at more than 7 million around the world, topping Toyota's global sales of 6.98 million units for 2009.
Credit crisis
Shares of Toyota have posted huge losses due to the massive recalls worldwide, dealing a heavy blow to its fame for safety and reliability.
Analysts said the credit crisis could be the most severe one since Toyota entered the Chinese market.
The automaker got a nickname of "King of Recall" in China after it launched at least four recalls last year, involving 1 million vehicles including best-selling models such as Camery and Carola.
He Kaiming, a senior engineer at the China Automotive Technology and Research Center, said it is normal to make recalls, but frequent recalls have sparked doubts over its quality control and management mode.
At the Kaida Toyota Automobile Sale and Service Co. Ltd, a Toyota's dealer in Tianjin, dozens of customers have inquired for recall details and some even threatened to cancel the purchase contracts.
The company's deputy general manager, surnamed Zhao, said she had to spend more time giving explanations to customers as the company has not received instructions from Toyota to cancel purchase contracts.
"How could Toyota face consumers' distrust after a series of recalls in China?" car owner Wang Xiaosong said.
"What we consumers care most now is whether Toyota could turn out safe cars in the future?" he said.
Sales of RAV4, debuted in Chinese market last April, amounted to 68,000 units. Almost all the RAV4 models in China would be recalled, heightening fears that car buyers could cancel purchase contracts.
A media liaison at the Tianjin FAW Toyota Motor Co. Ltd. said he would not comment on the recall as all executives have not returned from business trips to other countries.
A staff surnamed Shi at the joint venture's customer service center said Toyota is working to fix the defects, but testings and supply of auto parts could take one month before repairs.
The staff said the company will improve technologies to provide better vehicles. "We believe the recall would not affect our sales," she said.
The Tianjin FAW Toyota Motor Co. Ltd. has set 2010 sales target at 500,000, an increase of 60,000 from a year earlier.
Sales of Toyota, which has 18 subsidiaries in China, grew 21 percent annually to 709,000 units last year. The strong growth came on the heels of government's economic stimulus package despite earlier recalls.
"It looks like the frequent recalls are testing the limit of our tolerance," said a car owner surnamed Zhang in Tianjin.
A survey on Sina.com, a popular Internet portal, showed 23 percent of respondents are very disappointed with the RAV4 SUVs. Another survey on Ifeng.com indicated that 66 percent of netizens said the recall will affect their choice of car purchases.
Analysts also blamed the recall on Toyota's rapid and massive expansion in China since 2005.
The rapid expansion have exerted a huge pressure on quality control, said Wang Hao, partner of Zhong Lun W&D Law Firm.
Analysts also blamed the unified auto parts strategy on cost reduction as the measure added risks to auto parts while reducing cost.
China, the only bright spot as the world auto industry struggled amid the world financial crisis, overtook the United States as the world's largest auto market last year.
The China Association of Automobile Manufacturers announced on Jan. 11 that 2009 auto sales rose 46.15 percent year on year to 13.64 million units.
