Sunday, June 24, 2018
Business

Honda, Toyota lead way as auto sales rebound amid flurry of recalls

WASHINGTON — It's not too much of an exaggeration to say the U.S. economy was powered by car sales in 2012. Auto companies are now expected to have sold 14.5 million new vehicles in 2012, according to Kelley Blue Book. That's a 13 percent rise over 2011 and the highest number of sales since the financial crisis hit. If cars hadn't been flying out of dealerships, the year would have looked considerably bleaker. Vehicle purchases by consumers alone accounted for roughly 30 percent of all economic growth in the first half of the year, according to Credit Suisse.

And what made this car-buying frenzy so striking is that 2012 also happened to be a terrible year for car recalls. As auto analyst Jim Gorzelany reports, automakers had to recall about 14.3 million vehicles over the past year because of various defects — everything from steering issues to power-window problems.

But that didn't slow car sales one bit. Indeed, as Gorzelany explains, Toyota and Honda had to issue the greatest number of recalls in 2012 — Toyota with 5 million, Honda with nearly 3.4 million. Yet both companies increased their market share this year: Toyota's sales were up about 17.3 percent over last year, while Honda's were up nearly 25 percent.

Among the automaker's initiatives during 2012, Toyota recalled approximately 2.5 million vehicles across a dozen 2007 to 2009 model lines for power-window issues; 778,000 RAV4 and Lexus HS 250h vehicles for suspension problems; and 670,000 Prius models for steering troubles. Honda recalls included 807,000 Honda Pilots and Odysseys and Acura MDXs for faulty ignition switches; 572,000 Honda Accords for power steering hose issues; and 820,000 Civic and Pilot models for potential low-beam headlight failures.

Toyota and Honda had a bad year in 2011 in part because their supply chains were hurt by the earthquake in Japan and the resulting tsunami. So some rebound was expected anyway. But it wasn't just these two Japanese companies. General Motors had to recall 1.3 million vehicles. Ford had to recall 1.1 million. Just about every major car company had to issue at least one recall this year. But Americans kept buying up cars en masse anyway.

Why is that? One theory is that consumers simply aren't troubled by manufacturing recalls, especially if they're from a company like Toyota that has a reputation for reliability. A fascinating study last year from North Carolina State University found that Toyota's infamous 2009 safety recalls — a result of concerns over "sudden unintended acceleration" — made virtually no dent in how people perceived the brand.

Another possibility is that consumers can't really afford not to buy cars at this point. In January 2012, the typical car on the road was a record 10.8 years old. Most people had put off replacing their vehicles during the downturn, and their cars and trucks were becoming ancient. Auto analysts referred to this as "pent-up demand," and 2012 was the year the dam finally burst. Americans were bound to start buying cars sooner or later, and a wave of recalls wasn't going to stop them.

If so, that's relatively good news for 2013. Despite all the strong sales, the average age of cars on the road has now risen even higher, to just over 11 years old. That's one reason why many analysts predict the auto industry will keep growing and bolstering the U.S. economy.

   
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