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Toyota chief visits China amid recall woes
Published on: 2010-03-01
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BEIJING — Toyota President Akio Toyoda's visit to China to talk about his company's quality problems reflects the fast-growing Chinese market's importance to automakers as they struggle with weak global sales.

Toyoda was due to speak at a news conference Monday evening in Beijing, the company said, in his second foreign appearance following last week's visit to Washington where he was grilled by angry lawmakers. Japanese news reports said he would meet with Chinese officials.

"The fact that he is going to China second, after the United States, tells you the importance they place on China relative to other markets," said John Bonnell, a J.D. Power analyst. "Toyota wants to make sure it puts its best foot forward, not only with its best products but in instilling confidence."

The number of Toyota vehicles being recalled in China is small compared with the 8.5 million vehicles recalled worldwide since October for sticky gas pedals, faulty floor mats and glitches in braking software.

China overtook the United States as the biggest auto market last year with a 48 percent jump in sales and automakers are looking to it to offset weak global demand and drive future growth.

China could be critical to Toyota as quality worries batter sales elsewhere, said Zhang Xin, an industry analyst for Guotai Junan Securities in Beijing.

"It's very important. Toyota in the North American market was almost finished in the short-term, so it has to secure its Asian market. Its biggest market in Asia is China," Zhang said. "It must focus on this."

China's state-controlled media have made only muted comment on the recalls, in contrast to the blistering criticism Toyoda faced from American lawmakers.

"I think he is also coming to say, 'Thanks.' The U.S. side continues to put him under great pressure, but China doesn't," said Rao Da, general secretary of the China Passenger Car Association, an industry group.

The flood of recalls in the United States has shaken confidence in Toyota's reputation for excellent quality. In China, the company announced a recall of 75,552 RAV4 sport-utility vehicles in late January due to the gas pedal problem.

Toyota's February sales by its two local joint ventures with state-owned partners were up from a year earlier, according to Passenger Car Association estimates. Sales for its venture with Guangzhou Automobile Group climbed 50 percent to 17,500 units. Sales at its FAW Group venture jumped 106 percent to 40,400 units.

"So far, it's hard to see any direct impact on Toyota's sales," said Rao. "The crucial thing for them is brand reputation. If they don't pay great attention to this, it will eventually hurt the customers' trust."

A spokesman for Toyota China, Niu Yu, said monthly sales figures would be released Tuesday.

At a Beijing dealership, the Wu Fang Qiao Toyota Sales & Service Co., sales of the RAV4 are down while Camrys and Corollas, which were not part of the recent recall in China, are selling well, said a salesman, Liu Jinxin. He said he had no exact figures.

"There is certainly an impact on Toyota's sales here because even kids today know about the incident. There are a lot of people calling us and asking questions," Liu said.

Toyota got a relatively late start in China, after fitful efforts to break into the market using tie-ups between its subsidiary Daihatsu Motor Co. and state-run Tianjin Automobile Industry Holding Co.

Toyota rolled out its first made-in-China Camry in May 2006.

Sales growth lagged other foreign brands last year due to Toyota's focus on bigger cars while the government promoted smaller vehicles with tax breaks and subsidies. Toyota sales rose 50 percent, compared with 76 percent for Volkswagen AG and 219 percent for General Motors Co.'s Chevrolet unit.

Toyota is preparing to launch a lower-cost brand for China in response to demand for smaller cars, according to analysts.

In August, its joint venture with FAW recalled nearly 690,000 Camry and Yaris passenger cars after finding problems with electric window controls. There was no apparent effect on sales.

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