Frost & Sullivan Examines the Impact of Toyota's Quality Issues

LONDON, February 17, 2010 - Any timid hopes that the automotive industry was making its way out of
the woods have been dashed with the latest loss in consumer confidence
arising from Toyota's biggest recall in its 70-year history. The recall of
over 8 million vehicles over sticking accelerator pedals, and further
problems with loss of braking on the latest Prius, Lexus HS250 h and the Sai
models, will likely cost Toyota a total of 80 -100,000 cars in lost sales to
other vehicle brands in the first half of 2010, as sales of its 8 recalled
models and the Prius suffer a slowdown. Adding fuel to the fire is today's
press conference announcement by company president, Akio Toyoda, that the
company is considering a recall of the Corolla, the world's best selling car.

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The loss of consumer confidence and the reigning media frenzy have wiped
nearly one-fifth of the company's value off the board of the Tokyo stock
exchange. Moreover, the suspension of sales of eight Toyota models in the
U.S. will not only dampen first quarter sales figures, but also offer a
critical leg in to competitors offering trade-in incentives. "One of the key
concerns for Toyota is the loss in sales of its flagship hybrid Prius to
other market substitutes," says Vigneshwaran Chandran, Frost & Sullivan's
Program Manager, Business Strategy and Innovation Group, in a new article
entitled: Total Recall: Impact Assessment of Toyota's Quality Issues on its
North American Business. "Honda is a brand high on the brand recall list for
Americans and the Insight mild hybrid which is competitively priced, could
become an immediate alternative for Toyota customers," Chandran warns.

Initial estimates suggest that the accelerator fix alone will cost Toyota
half a billion dollars at least, and the overall cost could spiral to at
least US$1.5 billion. Compounding this is the temporary sales suspension that
has already cost the company more than 50,000 cars in lost sales since
January and a potential loss of another 50,000 cars over next three months.
The biggest expense however, may be the legal fees, with already more than 40
class-action suits filed against Toyota in the U.S. and 13 lawsuits alleging
death or injury due to unwarranted acceleration.

In the longer term, Toyota faces tremendous publicity damage. Owners
worry about loss of vehicle re-sale value and confidence in the brand as
representing safe and reliable cars has plummeted. In response, Toyota is
trying to shift some of the blame onto suppliers, while repairing all
affected models. As part of its damage control campaign, dealerships are open
longer, television campaigns re-iterate the strong quality record of the
company and the company has used an outright apology combined with a
commitment to fix things. Despite these efforts, it remains to be seen how
the whole issue will affect the long-term performance of the company. This is
especially true as other carmakers, including Honda and Ford, increasingly
face recalls.

Toyota upped its vehicle forecast for the fiscal year ending March 2010
from 7 million to 7.2 million units in February and is trying to come back
strongly in March with strong incentives, including a US$1,000 discount in
addition to existing loyalty cash incentives for returning Toyota owners. The
company also plans to offer free oil changes, regular services and match
Hyundai's 10 year powertrain warranty program. "With an anticipated slowdown
in demand due to scrappage incentives coming to an end in most developed
markets, we wait to see if the recalls affect overall consumer confidence and
purchase behaviour, thus slowing down the market recovery further," says
Chandran.

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please e-mail Monika Kwiecinska, Corporate Communications, at
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telephone number, company e-mail address, company website, city, state and
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    Contact:
    Monika Kwiecinska
    Corporate Communications - Europe
    P: +48-22-390-4127
    F: +48-22-390-4160
    E: monika.kwiecinska@frost.com

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Monika Kwiecinska, Corporate Communications - Europe of Frost & Sullivan, +48-22-390-4127, fax, +48-22-390-4160, monika.kwiecinska at frost.com