Recall may dent Toyota's brand image, say analysts

Consumers edgy about US reports, defective brake pedals in China

BEIJING - Toyota's recent move to recall nearly 8.5 million vehicles globally to rectify faulty accelerators and brakes has dented its brand image in China although the major chunk of the recalled units are from the US, analysts have said.

The setback also comes as a warning to Chinese automakers, which are aggressively expanding both domestically and abroad, the analysts cautioned.

"Although my China-made Camry is not included in the list of models that are being recalled, I am still worried that it may run into trouble when I drive it someday soon," said Zhang Yabin, a 31-year-old trader in glass products.

"In fact, I have even thought of replacing the car with a German brand," he added. "Quality should be the top concern for drivers."

"It is obvious that the negative news about Toyota's recent recalls in the US has held back visitors to our showrooms," said a salesman of FAW-Toyota's 4S (sales, service, spare parts, survey) store in Beijing, who declined to be named. "Visitors to our showrooms are even expressing doubts over whether the Toyota cars that we are selling would have the same or other quality issues in future."

Toyota began to recall its RAV4 sports-utility vehicle model, produced by FAW-Toyota in Tianjin, from across the country on Sunday. Its China unit said that, except the RAV4, all other models being sold in China were free of accelerator or brake problems.

More than 75,500 units of Toyota's RAV4 model sold in China have defective brake pedals, according to China's General Administration of Quality Supervision, Inspection and Quarantine.

The national quality watchdog also urged people who are driving those Toyota models manufactured abroad to contact the company's authorized service centers or the local customs office for checks on any potential defects.

Akio Toyoda, the president and CEO of Toyota will meet China's Vice-Premier Wang Qishan today in Beijing and hold a press conference later in the day to explain its recent recalls to Chinese consumers. This follows his visit to Washington last week.

According to a Toyota salesman, the Japanese automaker has kicked off some favorable promotional offers to spur slowing sales across the country.

"If Toyota can take active and suitable measures in China on time, it won't face the same big challenges as it is facing in the US, because Chinese consumers are more sensitive to the pricing, not the brand image," said Zhang Xin, an analyst at Guotai & Jun'an Securities.

"It's still uncertain whether Toyota will regain the brand loyalty from consumers after such a huge quality scandal," said Jia Xinguang, an independent auto industry analyst based in Beijing.

"Toyota's quality crisis should be attributed to its excessive and sharp expansion in recent years. And, the overmuch cost saving in the supply chain must have lead to the lack of quality supervision and inspection. Chinese automakers should learn from Toyota's current crisis when they go about ambitiously expanding."

Zhong Shi, another independent auto analyst, agreed with Jia's assessment. "Chinese automakers should think before they do something, especially when they challenge their own capability. They can be taught from Toyota's quality crisis that blind expansion is fatal."

(China Daily 03/01/2010 page11)