Millions of Toyota recalls leave brand undented

February 16th, 2012 - 5:19 pm ICT by IANS  

Washington, Feb 16 (IANS) Toyota’s safety-related recall of nine million cars that began in 2009 made no dent on how consumers perceived the brand.

“These findings highlight the importance of establishing and maintaining a reputation for quality,” says Robert Hammond, assistant professor of Economics at the North Carolina State University, who led the study.

“Not only will it help you sell cars in the first place, but it will help you weather public scrutiny in the event of a recall,” he was quoted as saying by the Journal of Economics and Management Strategy reports.

“I wanted to look at how a product recall for safety would affect what a consumer is willing to pay for that product,” Hammond says, according to a North Carolina statement.

He looked at Toyota models that were subject to recall in 2009-2010 as a result of highly publicised concerns over “sudden unintended acceleration”. Those recalls applied to over 9 million vehicles worldwide.

Hammond looked at used-car markets. Sales of new vehicles can make it difficult to assess the impact of a recall because there are multiple confounding variables - such as promotions, marketing campaigns and new models that were not subject to the relevant recall.

But by looking at the average prices for specific models in the used-car market, researchers can determine 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 despite the high-profile media coverage of the Toyota recalls, there was very little effect on what consumers were willing to pay for a Toyota.

Specifically, Hammond found that the average price of affected vehicles declined by approximately two percent relative to comparable, unaffected vehicles such as similar Honda models. That two percent decline is within the statistical “margin-of-error” for the study.

And the effect did not last long. The first Toyota recall was in November 2009, and the apparent decline in vehicle price had levelled out by January 2010.

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 Toyota and Audi experiences with the recall of vehicles highlights the value of a well-established reputation,” Hammond says.

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