Can’t Bring Me Down: Toyota Brand Unaffected By Recalls

The massive wave of recalls that brought some 9 million Toyotas back to the dealers, amidst a frenzied coverage by a sometimes hysteric media, did less damage to the brand than imagined. A study from North Carolina State University shows that Toyota's safety-related recalls that began in 2009 had little to no impact on how consumers perceived the brand. Dr. Robert Hammond, assistant professor of economics at NC State, launched the study because he wanted to see how consumers respond to recalls. Hammond looked at used-car markets as a measure of 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 there was very little effect on what consumers were willing to pay for a Toyota. Hammond found that the average price of affected vehicles declined by approximately 2 percent relative to comparable, unaffected vehicles (such as similar Honda models). That 2 percent decline is within the statistical margin-of-error for the study. What's more, the effect was temporary: The first Toyota recall was in November 2009, and the apparent decline in vehicle price had leveled out by January 2010. Initial reports of drops in resale value turned out to be premature. In 2011, Toyota and Lexus were back on top in the Kelley Blue Book rankings. 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 paper, "Sudden Unintended Used-Price Deceleration? The 2009-2010 Toyota Recalls" will be published in the Journal of Economics and Management Strategy.   from The Truth About Cars http://www.thetruthaboutcars.com

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