Any recall can become costly for an automaker, but Toyota’s recall of 8.5 million vehicles worldwide will likely be especially costly when the dust finally settles.
In early February, Toyota estimated that total costs of the recalls would be around $2 billion. But as the month unfolded, falling sales ensued and that number quickly seemed to be conservative.
“We expect Toyota to respond aggressively to win back much of its lost market share, but it will come at a cost,” said Kurt Sanger, an analyst with Deutsche Securities.
Toyota is betting that short-term momentum will be regained by offering 0 percent financing as well as two years of free maintenance to existing customers that come back to the brand and purchase a new Toyota. These incentives will also come at a cost, but Toyota asserts that their incentives are costing far less per car than competing brands with similar offers.
Aside from slumping sales and falling market share, Toyota has to contend with the 89 class-action lawsuits that could cost the automaker over $3 billion. While the picture does appear to be grim, there’s still light at the end of the tunnel. Although sales have certainly taken a tumble, the automaker has reported that sales jumped at the start of the month thanks to its March Sales Event. These same incentives might even be extended if they prove to help the embattled automaker move forward, said Toyota Repairs Albuquerque.
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