China has been less of a bright spot for Toyota than for most of its rivals, and its latest global recall could hurt it further in the world's largest auto market — not least imagewise.
Though Toyota's recall in China of 75,552 RAV4 sport-utility vehicles is tiny compared with its massive global recall of about 8 million vehicles over a gas-pedal flaw, wide media coverage of the issue here as well as its previous recalls in China may turn more consumers against it.
"It will definitely impact sales here," said Rao Da, secretary general of the China Passenger Car Association.
Toyota has not had an easy time in China and the world-wide reputation it enjoys of quality has not yet become quite as entrenched here as elsewhere.
The recall "raises a bigger question mark in China than it does in other markets, because of the shorter time that they've been here," said John Bonnell. "If it becomes more of a conviction that the quality is suspect, [the recall] will stay with them for a long time until they prove otherwise."
Beiing-based spokesman Niu Yu said Toyota is working with suppliers to strengthen quality control and has told dealers to communicate with customers in a "sincere and honest" manner.
The RAV4 recall in China, while relatively small in number of vehicles affected, compounds a public relations problem for Toyota after a series of recalls in the last couple years, including a recall of 259,000 Camry sedans for faulty brake systems in April last year.
Also in 2009, the company launched China's largest recall effort ever, recalling 688,314 vehicles to fix faulty electric window-control systems in its Corolla, Camry, Vios and Yaris sedans.
These quality troubles don't help the Japanese auto maker compete in China, where its market share of passenger vehicles fell to 7.5% in 2009 from 9.6% in 2008, according to data from JD Power.
The quality issues heightened by the recall also bring reminder of another Toyota misstep in China.
Last year, the auto maker made a crucial miscalculation when it failed to anticipate booming demand for small cars, causing it to miss out on much of the industry's growth in a spectacular year for the market. It began to recover lost ground toward the end of the year, but it finished 2009 up 21% at 709,000 units, while overall sales in China last year surged 46% to 13.6 million units.
Toyota's low sales base in China last year together with the strong overall auto market may mask the impact its global recall will have on sales growth here, said Rao. "We expect February sales to be strong," he said. "Impact in China will be like in the U.S., but it won't be obvious."
In January, the car maker's sales rose 53%, strong on paper but eclipsed by growth of 126% in the industry as a whole.
Bonnell said he expects immediate impact from the recall to be "mildly negative" if managed well. "They still have the opportunity to maintain a strong reputation," he said.
With competition in China set to become tougher as growth is expected to slow to 10%-15% this year, that opportunity may not last forever.
