Historic Auto Recalls Show Little to No Impact on Unit Sales, Market Share

Despite significant international media attention, and more than 30 recalls covering nearly 14 million vehicles in the United States, the severity of General Motors’ current recall remains to be seen. However, according to Cars.com chief analyst Jesse Toprak, the long-term impact on unit sales and market share will be minor if GM’s ongoing recall follows historical patterns.

“We’ve learned from other major recalls throughout history that in the majority of cases, unit sales and market share are barely affected,” said Toprak. “The numbers tell us that consumers seem to care very little about automotive recalls and that automakers are able to bounce back fairly quickly.”

In 1995, Honda recalled 3.7 million vehicles for a faulty seatbelt buckle. One year following news of the recall, unit sales for the manufacturer were up 6.2 percent and by the second year, sales were up 18.4 percent. A year later, Ford recalled 7.9 million vehicles due to a faulty ignition switch. In 1997, one year following news of the recall, unit sales dropped a mere 0.7 percent, and by 1998 sales were back up 1.4 percent.

The largest recall in automotive history was from Ford in 2009. The manufacturer recalled more than 14 million vehicles due to faulty cruise-control switches that were a possible fire hazard. Despite the volume of vehicles recalled and significant media coverage, the automaker posted a 19.5 percent increase in unit sales in 2010 and a 32.6 percent increase in 2011.

Recalls unit sales“We’ve determined that most automakers recover to pre-recall unit sales numbers by the second year following news of the recall,” said Toprak. “Though counterintuitive, consumers tend not to punish brands for faulty vehicles.  In fact, manufacturers and dealers have an opportunity to capitalize on such events: At no other time do dealers see such an influx of customers coming through the door to get their vehicles serviced. Not only is there an opportunity to reestablish relationships with service customers, but the captive audience can often be converted into a new vehicle sale. Manufacturers and dealers also become more proactive with incentives and special offers during recalls, and they’re willing to pay a price to keep numbers up and move inventory. Additionally, manufacturers get smart about advertising dollars during recalls, holding funds at the height of the recall to be able to make a big impact at just the right time.”

One of the most controversial recalls of our time, and arguably the most comparable to GM’s current situation, was the Toyota recall of 2010. It affected approximately 7 million vehicles and Toyota experienced a slight dip in unit sales in 2011 (-6.7%). However, the trend of recovery continued to play out – Toyota posted an increase in unit sales of 18.1 percent by 2012.

Impact on unit sales and market share for the top five largest recalls over the past 20 years:

 

Recalls market share

 

Honda

Year: 1995 | Defect: Faulty seatbelt buckle | Units affected: ~3.7 million

Unit Sales Percent Change
1st Year Change 2nd Year Change
6.2% 18.4%

 

Market Share Percent Change
1st Year Change 2nd Year Change
0.2% 0.8%

 

Ford

Year: 1996 | Defect: Faulty ignition switch | Units affected: ~7.9 million

Unit Sales Percent Change
1st Year Change 2nd Year Change
-0.7% 1.4%

 

Market Share Percent Change
1st Year Change 2nd Year Change
-0.2% -0.4%

 

General Motors

Year: 2004 | Defect: Tailgate cable failure | Units affected: ~3.6 million

Unit Sales Percent Change
1st Year Change 2nd Year Change
-3.8% -12.2%

 

Market Share Percent Change
1st Year Change 2nd Year Change
-1.1% -2.8%

 

Ford

Year: 2009 | Defect: Cruise-control switch | Units affected: More than 14 million

Unit Sales Percent Change
1st Year Change 2nd Year Change
19.5% 32.6%

 

Market Share Percent Change
1st Year Change 2nd Year Change
1.2% 1.3%

 

Toyota

Year: 2010 | Defect: Unintended acceleration | Units affected: ~7 million

Unit Sales Percent Change
1st Year Change 2nd Year Change
-6.7% 18.1%

 

Market Share Percent Change
1st Year Change 2nd Year Change
-2.3% -0.8%

*Historic recall data from the Center for Auto Safety

Leave a Reply

Your email address will not be published. Required fields are marked *