Shares of Japanese auto giant Toyota experienced a significant downturn on Thursday amidst an escalating safety test scandal involving its subsidiary, Daihatsu. This comes after Toyota recalled one million vehicles in the United States due to concerns over airbag safety.
Daihatsu announced on Wednesday that it would suspend the shipment of all its domestic and overseas vehicles following the release of an independent panel’s report. The report revealed that Daihatsu had been manipulating tests as far back as 1989. Toyota expressed its apologies and pledged to undergo a fundamental reform in light of these findings.
According to Toyota, the probe conducted after a safety scandal emerged in April discovered new irregularities in 174 items across 25 test categories. These irregularities were in addition to the wrongdoing previously uncovered in April and May relating to door parts and side-collision tests.
Daihatsu submitted a report to Japan’s transport ministry on Wednesday, stating that new irregularities were found during an internal investigation. Japanese officials visited Daihatsu’s headquarters on Thursday to conduct an inspection.
Nobuhito Kiuchi, a transport ministry official, confirmed that an on-site inspection would take place to determine the veracity of Daihatsu’s report and uncover any further misconduct. Kiuchi added that the inspection would continue until early next year before any administrative orders are issued as punishment.
Meanwhile, Hino Motor, another affiliate of Toyota specializing in truck and bus manufacturing, admitted last year to falsifying emissions data.
Shortly after the release of the Daihatsu report, Toyota announced a major recall of vehicles in the United States. The recall includes popular models such as Camry, Corolla, and Highlander, with concerns raised about airbag sensors in the front passenger seats. In a statement, Toyota warned that the sensors may have been improperly manufactured, potentially leading to a short circuit and the airbag failing to deploy correctly in certain crashes, consequently increasing the risk of injury.
In response to these developments, shares in Toyota plummeted by as much as 5.6 percent in Tokyo, marking the most significant downturn in 18 months. However, Tatsuo Yoshida, an auto analyst at Bloomberg Intelligence, suggested that the impact on the company would likely be limited due to the relatively small number of vehicles involved compared to Toyota’s overall production.
Yoshida emphasized that vehicle recalls are a common occurrence in the auto industry, and if properly executed, they do not necessarily have a negative impact. However, he expressed concerns that the Daihatsu issue could have financial ramifications for Toyota and that the subsidiary’s reforms may take time given the deeply ingrained culture surrounding safety certifications.
The independent panel ultimately attributed Daihatsu’s misconduct to a lack of managerial expertise and an opaque work environment. In April, Daihatsu admitted to falsifying crash test results for four models, affecting a total of 88,000 vehicles produced in Thailand and Malaysia between 2022 and 2023. The report noted that the irregularities over the decades were partially due to an excessively tight and inflexible development schedule, which placed immense pressure on Daihatsu employees to pass crash tests on their first attempt to minimize costs.
In light of these developments, it is clear that Toyota is facing significant challenges that require immediate attention to restore consumer trust and ensure the safety of their vehicles.
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it