Based on a telephone survey of 1,704 U.S. adult vehicle owners in April, Consumer Reports has indicated that 57% of Toyota owners would “most likely” agree to buy another new vehicle from Toyota Motor Corp. (TM). This was down from 70% in a December survey, indicating a downfall in the automaker’s reputation.
Honda Motor Co. (HMC) attained the top position in the survey, with 68% of its owners agreeing to return to its vehicles, up from 67% in December. Ford Motor Co. (F) followed Honda in the survey, with 61% of its vehicle owners most likely returning to its vehicles, compared with 58% in December.
The fall in Toyota’s reputation can be clearly linked to its string of automotive safety recalls in the past few months. So far, the automaker has recalled more than 8.5 million vehicles from around the world related to problems such as faulty accelerator gas pedals, slipping floor mats and defective braking systems. The recall included popular models such as the 2010 Prius hybrid and Toyota Camry.
Toyota has been slapped with dozens of private lawsuits due to the recall. The value of claims under the lawsuits is estimated to reach about $4 billion, reflecting an average loss of $600 per vehicle.
To make matters worse, the U.S. government has imposed the highest-ever fine of $16.4 million on Toyota, accusing it of a deliberate delay in recalling the vehicles by hiding its defects even though manufacturers are legally obligated to notify the U.S. safety regulators within 5 business days if they come to know of a safety defect.
To regain consumer confidence, Toyota began offering the largest sales incentives in its history since March this year. The incentives included zero-percent financing for five years on top-selling models such as the Camry. It has also offered attractive leasing terms and free maintenance for two years for Toyota loyals.
The incentives have pushed Toyota’s sales up 41% to 186,863 vehicles in March and 24.4% to 157,439 vehicles in April. The automaker saw strong sales of even its recalled models, Corolla, Camry and RAV4.
According to Autodata Corp., Toyota’s incentive during March increased 46% to $2,310 per vehicle compared with GM’s incentive of $3,174 per vehicle (down 19% year over year) and Ford’s incentive of $3,035 per vehicle (down 2% year over year).
Despite the incentives-backed sales growth, the Consumer Reports survey clearly showed that Toyota failed to prevent losing its reputation.
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