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Toyota's troubles bubble up in China

By Makiko Kitamura and Yuki Hagiwara (China Daily)
Updated: 2010-03-18 09:12

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A worker cleans a Toyota RAV4 at a?dealership in Beijing. CHINA FTOTO PRESS

Tokyo - Drivers in China are no longer in a hurry to own Toyota Motor Corp's cars.

Neil Hu, a sales manager at a Toyota dealership in Beijing, said he has stopped charging a 5,000 yuan ($732) premium to customers who want to skip the waiting list for RAV4 sport- utility vehicles. He took the initiative after the Japanese carmaker recalled 75,552 of the SUVs in China last month to fix gas pedals that may stick.

"I heard the situation in the US is pretty bad for Toyota," Hu said. "The recall has impacted us as well."

Toyota, which grew more slowly than competitors in China in 2009, will likely lose more market share and see a decline in local profit margin this year, analysts say. The carmaker has relied on a reputation for quality and safety to sell high margin, mid- to large-size models even as the world's biggest auto market shifts to cheaper, smaller cars, encouraged by government incentives.

With Toyota's brand damaged by global recalls of millions of vehicles, profit margins for its SUVs and Camry and Crown sedans may shrink, said Ashvin Chotai, London-based managing director of Intelligence Automotive Asia Ltd, an industry consultant.

"With this recall saga, Toyota's premium pricing power in China is gone," Chotai said. "Toyota's cars don't have enough good value for money."

Toyota has lost $24.5 billion in market capitalization this year as it recalled over 8 million cars globally to fix defects linked to unintended acceleration. The company faces at least 118 class actions in the US and at least 36 individual lawsuits claiming deaths and injuries caused by sudden acceleration of Toyota or Lexus vehicles.

Toyota President Akio Toyoda flew directly to Beijing on March 2 to apologize for the vehicle defects, after attending US Congressional hearings about the recalls in Washington. He skipped Europe's Geneva auto show, underscoring the growing importance of the Chinese market.

Toyota rose for a fifth straight day in Tokyo, advancing 0.9 percent to 3,580 yen as of 9:44 am local time. The carmaker's shares have fallen 7.7 percent this year.

The company's February China sales rose 30 percent to 45,400 vehicles, underperforming the overall passenger-car market's 55 percent surge.

Bloomberg News