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NADA Used Car Guide: Sales impact from major vehicle recalls
Estimated impact of recalls on Ford, Toyota and General Motors
McLEAN, Va. Sept. 9, 2014
McLEAN, Va. Sept. 9, 2014 /PRNewswire-USNewswire/ — With more than 39 million vehicles recalled for safety-related issues through August, 2014 is on pace to shatter the previous high set in 2001 when 38.8 million vehicles were recalled for various defects. While most recalls are simple, on some occasions a recall is serious enough to have a lasting effect.
NADA UCG explores the effect that major recalls have had on automaker’s new and used vehicle sales in its latest white paper The Impact of Vehicle Recalls on the Automotive Market.
“Research has shown that minor, well-handled recalls have an insignificant effect on automakers. However, cases involving a large number of vehicles, numerous reports of severe injury or death, and extensive media coverage can impact market performance” said Jonathan Banks, Executive Automotive Analyst at NADA Used Car Guide.
Brand perception prior to a recall – determine the severity of the damage. To illustrate this, NADA’s analysts examined the market impact of the high-profile 2000–2001 Ford/Firestone tire and 2009–2010 Toyota acceleration recalls, as well as the General Motors ignition switch recalls that have dominated industry headlines in 2014.
In 2000 and 2001 Bridgestone/Firestone and Ford recalled millions of Firestone tires to address tires that were failing prematurely on Ford sport utilities. The defect caused multiple deaths and captured media headlines for an extended period of time. Even so, the impact to used Ford truck prices was minimal.
“Although Ford’s competitive position was slowly getting better, consumer expectations of the brand were relatively low at the time,” said Mike Stanton, Vice President COO of NADA Used Car Guide. “By NADA Used Car Guide’s measurement, the Ford / Firestone tire recalls reduced the competitiveness of Ford’s used truck prices by just 2 to 3 percentage points at its peak. By 2002, Ford truck prices had essentially reassumed their pre-recall trend.”
By contrast, Toyota fared much worse when it recalled nearly 8 million vehicles for issues related to unintended acceleration in late 2009 and early 2010. Unlike perceptions of Ford earlier in the decade, the universal perception of Toyota as a builder of high-quality, reliable vehicles led to a dramatic contrast between pre- and post-recall perceptions of the brand.
Before the recalls, used Toyota cars and trucks carried prices nearly 40% higher than those of direct competitors. Afterward, Toyota’s advantage over the competition was reduced to 30% – 10 percentage points below its pre-recall position.
General Motors’ ignition switch issue is the first recall event since Toyota’s with conditions grave enough to threaten brand value. To-date, GM has recalled 2.6 million compact cars globally for defective ignition switches that could be inadvertently switched off preventing airbag deployment in the event of a crash. Despite being associated with multiple deaths and intense media coverage, GM’s new vehicle sales and used vehicle prices have gone relatively unscathed.
“GM’s new vehicle sales are up 3% year to date and we’ve observed a just slight 1 to 2 percentage point decline in the competitive position of used Chevrolet car prices since April – discernible, but far short of the compelling evidence collected after Toyota’s recalls” said Jonathan Banks, Executive Automotive Analyst at NADA Used Car Guide.
Click here for the full report The Impact of Vehicle Recalls on the Automotive Market.
About the NADA Used Car Guide
Since 1933, NADA Used Car Guide has earned its reputation as the leading provider of vehicle valuation products, services and information to businesses throughout the United States and worldwide. NADA collects and analyzes over one million combined automotive and truck wholesale and retail transactions per month. Its guidebooks, auction data, analysis and data solutions offer automotive/truck, finance, insurance and government professionals the timely information and reliable solutions they need to make better business decisions. Visit nada.com/b2b to learn more.
NADA represents nearly 16,000 new-car and -truck dealerships with more than 32,000 domestic and international franchises. For more information, visit www.nada.org .