Toyota was rocked by a series of scandals – analysts were not confused

A sign is displayed outside a Toyota Motor Corp. dealership. on January 30, 2024 in Tokyo, Japan. Toyota President Akio Toyoda on Monday apologized for serious cheating in certification tests for seven vehicle models as the automaker suspended production of three of them.

Tomohiro Ohsumi | Getty Images News | beautiful images

Japan’s largest auto manufacturer Toyota has recently been in the spotlight, but for all the wrong reasons.

Goods and services from the land of the rising sun are known for their high standards and quality as well as reliability. However, Japanese automakers have recently been criticized for falsifying test certification records.

In 2023, two of the three largest global auto brands will come from Japan, according to Statista. Toyota took the crown with 10.7% market share, while Germany’s Volkswagen ranked second with 6% market share. Japanese Honda’s mortobike is the third largest brand, accounting for 4.6%.

But for Toyota, the world’s leading automaker by market share, the latest safety scandal is not the first time it has been investigated for faulty testing data.

What happened?

How did Toyota respond?

In response to the scandal, Toyota President Akio Toyoda apologized to stakeholders and customers, and the company also apologized. Temporarily suspend shipping and sales Among the three models currently produced in Japan are the Corolla Fielder, Corolla Axio and Yaris Cross.

Toyoda said the company’s seven vehicle models were “tested using methods different from the standards set by national authorities”.

Other scandals

Although the latest revelations were only announced two weeks ago, the Ministry of Transport’s investigation initially stemmed from another safety scandal at Toyota subsidiary Daihatsu.

In December, Daihatsu temporarily halted deliveries of all its vehicles after an investigation uncovered safety issues with the company’s cars, including cases where the airbag controller used in tests for some models was different from those sold general public.

In April last year, Daihatsu said it rigged side crash safety tests conducted on 88,000 small cars, most of which were sold under the Toyota name. An investigation by an independent third-party group also found that certification The irregularities lasted until 1989.

Daihatsu apologized for “betraying the trust of customers and other stakeholders and for causing great inconvenience and concern.”

Some Daihatsu cars have it deliveries resumed in April this year after revised testing.

In 2022, Hino — Toyota’s truck manufacturing subsidiary — Fake emissions data on certain engines since 2003, affecting more than 640,000 vehicles.

What is next?

Given the recent scandals, will investors flee stocks and instead put their money into other scandal-free Japanese automakers?

As of June 13, Toyota’s shares were at their lowest level since February 6. Since the scandal broke on June 3, Toyota shares have fallen 8%.

However, a Citi note on June 3 said the share price impact on the sector would be “minimal.” They added that “there were no performance issues and inappropriate behavior does not appear to result in a recall.”

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Citi points out that part of the problem lies with the certification process itself, saying that “in many cases, even when the certification process is not followed precisely, the tests are even more stringent afterward still underway.”

Citi analysts predict Toyota’s monthly output will fall by about 11,000 units, resulting in sales of about 22 billion yen ($139.89 billion). “However, given that production is likely to resume in two to three months, we expect the overall impact is likely to be modest,” they added.

Market analysts generally gave a positive view.

According to FactSet data, 12 of 19 analysts in June gave the stock a “buy” or “overweight” rating, with an average price target of 3,888.56 yen, an upside of 24.3 % compared to the closing price on June 13. The remaining seven issued a “hold” order.


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