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Problems continue for the #1 automaker in the world, Toyota. Last week they started recalling several different models for sticky gas pedals and this week the #1 selling hybrid the Toyota Prius are to be recalled for problems with their brakes.
For this week's blog, we are going to flashback to Microeconomics and explore the consquences of this situation for Toyota, its competitors, and the auto market in general. While I know it is tough to graph on this blog, I want you to think about the S/D graphs for Toyota, its competitors, and the auto-industry. I also would like you to think about the firm graph for Toyota (does Toyota operate as PC, Monopoly, Monopolistic Compeititon, Oligopoly?). Instead of graphing, describe what is happening in each of those 4 graphs (what line is shifting, what changes are occuring, etc.). Then, when you are done, find an article online that supports your argument. Explain why you chose that article and use at least 2 quotes from the article that support the changes you made on your graphs. Please cite the article in your response.
Due 2/15 (extra day thanks to President's Day!) @ 8pm.
Posts
As I am a Toyota driver, I was specifically concerned with this recall because it is evident that with one flaw that has been discovered, about a million more are bound to show up. And because the company is so large, there are definitely going to be some economic consequences of these recalls on the auto industry. Toyota will specifically go through a rough patch because the firm is going to go through a great deal of increase in the marginal and average total cost. Also, as this is an oligopoly, the effects will be far greater than if it were a smaller business because the downturn of such a successful company will have great effects on the industry. Specifically, I feel that Toyota will definitely experience a decrease in the demand for its goods and possibly even a decrease in supply because their costs are going up and they cannot afford to fix all the problems and create new cars. This would mean that the quantity of cars sold by the company would decrease, but the price of the cars would stay relatively the same because the supply would go down, meaning their profit margin will decrease. In terms of the competing auto companies, the demand for those cars will definitely increase because dealers will have to go to other companies to get their cars to sell, and because people are not going to trust Toyota as much due the flaws that have been pointed out. Therefore, as demand for the competing companies’ cars go up, so will the price of these cars and the quantity produced as well as sold. The auto industry will definitely experience a decrease in supply of cars because one of their biggest producers (Toyota) will not be producing as much to compensate for the losses made when fixing their problems and such. This will mean that the prices will go up and the quantity of cars sold will decrease, but as the competing companies start to produce and sell more, the supply will eventually shift back to where it was.
ReplyDeleteThe article I chose to support some of the claims that I made while shifting these graphs is called “Akio Toyoda Offers Condolences for Deaths”. (http://www.toyotarecall.org/20100130-akio-toyoda-offers-condolences-for-deaths/) The two quotes that I particularly want to focus on are both supporting my claim that people are not going to demand Toyotas as much as they did in the past, and this may cause Toyota to fall behind in the ratings as the number one automaker in the world. “Customers bought our cars because they thought they were the safest,” said Toyoda, “but now we have given them cause for great concern”. This definitely shows that people will be more cautious and less willing to buy these cars after such incidents have occurred. The article also says that “automotive rentals companies have shelved over one million Toyota cars and have been forced to purchase cars from other vendors. Our reports indicate that car rental companies are buying thousands of cars to fill the gaps in demand in the fleets.” This means that other companies, are getting rich off of this because the demand for these competing cars are increasing due to a good number of cars not functional at this time, which supports my claim that the demand for the competing companies’ cars will go up. And because so many cars are being pulled, the supply of the auto industry is going down as well as the fact that Toyota will not be producing as much. This also accounts for the increase in marginal and average total cost because Toyota as a firm will not be producing as much, therefore not making much money, and still having to fix the problem. It will definitely harm the company’s reputation as well as their economic status, but they will definitely be experiencing a few more bumps along the way before it gets any better. People will definitely try to find one or two more problems before they will allow the company to try to sort out the mess they are already in.
The recent recall in Toyota cars is clearly not a good thing for the company. There will be growing uncertainty with the safety of the cars and therefore less demand for them too. On the other hand this is a perfect opportunity for our own domestic car companies to jump right back into the game. While Toyota is losing demand for their specific cars the demand for cars overall does not go away. The demand of the competitor’s cars will shift to the right because as of now they do not have safety problems. The shift in demand away from Toyota will lead the company to cut back on production in order to cut the costs of repairing old cars while making new ones. In the article http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx the Chief operating officer of motor sales said they “are working to restore consumer trust in Toyota” but this could take years and in that time the domestic car makers, being competitive goods should work to get their cars bought. They are also trying to “support our dealers in a trouble free manner.” They need to do this because if they do not the dealers will begin to fail and so will the production and sale of Toyota cars.
ReplyDeleteThe demand for competing cars is going to go up because people are going to be looking for a substitute for hybrid cars, now that the prius’s aren’t functioning right. So now Honda hybrid demand will go up, and so will demand for other fuel efficient substitutes. The auto industry in the short run will have a decrease in demand, because the demand for the largest auto company has gone down. But in the long run demand will rise elsewhere for other vehicles and it will go back to how it was before. The Toyota Company is getting the worst of it all though because demand goes down for its cars, and also supply will shift right because a large sum of money is going to be used to fix the defects, so they can no longer produce the same amount of cars. Toyota is an oligopoly in which it is really hard to enter the car industry. The fear of faulty cars makes “the company now likely to see sales decline, which could lead to a loss of jobs both overseas and in Japan.” The effects of the loss of demand won’t be good for Toyota sense “Toyota has overseas bases in over 27 countries and regions, and employs more than 300,000 people worldwide.” This will be a loss of a lot of jobs everywhere but hopefully the prevention of future accidents keeps their reputation in tack and sales will go up in the long run.
ReplyDeletehttp://www.investors.com/NewsAndAnalysis/Article.
AP ECON BLOG 5
ReplyDeleteI think that because of the recall for the Toyota Prius, is bad for the company (for a little while) but good for the competitors (for a little while). According to an article entitled “Toyota’s Problem in Other Vehicles,” written by Greg Gardner, “Toyota has been hit disproportionally hard by unintended-acceleration problems because it has been slower than some competitors in introducing braking technology that could have prevented it, according to safety records and consumer advocates.” What I found interesting is that “Toyota has urged replacement of floor mats or gas pedals, engineers familiar with engine technology said electromagnetic interference from a range of devices including cell phones and microwave towers can disrupt the electric signal to the electric throttle control system, which controls the accelerator.” What I like about this article is that it talks about how all car companies are experiencing technical difficulties with their cars, however Toyota happens to be more often. “The problem has occurred in almost every manufacture vehicles. And consumer reports analysis of 166 sudden-acceleration companies to federal safety regulators for 2008 found they came from 22 brands, but 41% came from Toyota. That was more than Chrysler, General Motors, Honda and Nissan combined.” I think the consequences that Toyota will have is that they will be losing their profit because their supply of cars has gone down because of the recall. Knowing basic economics, I know that when the supply line shifts left the price will go up and the quantity will go down. For Toyota’s competitors, the demand will go up, therefore the price will go up as well as quantity. Toyota works in a competitive industry and therefore it would be bad for them because they will be losing their customers to other companies. I feel that for a little while the demand for Toyota will go down however, I feel that once the cars get approved and back onto the market, the demand for them will go up because they would be “safer” and therefore the price will go up, along with the quantity.
This recall is obviously not good for Toyota they will be spending money on the recall and not spending it on the company; causing the demand to go down. Not only that but it will increase the demand for substitute companies. Thus decreasing their supply of cars while increasing other dealers. Toyota operates in an oligopoly system which makes it difficult for competitors to enter; this will help them out actually since cheaper goods aren’t available. In the long run however; the major issue may be to its public image in the article http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx it explains that the public may be searching for other companies instead of Toyota. In my opinion companies should take pride in their product and there shouldn’t have anything wrong with it in the first place. Once the recall was in place it meant problems for everyone. The producer Toyota for having to fix all the cars and the consumer for having no vehicle for a period of time. Overall this will hurt the economy and will hurt the image of the leading producer of cars in the U.S. and will hopefully be time for some changes within the company to improve its product.
ReplyDeleteA recall on Toyota vehicles is not a good for a company in a competitive market. This a great opportunity for our domestic car companies to take the business of Toyota. This recall made many Toyota and other consumers wondering about the quality of the car, making the demands of Toyota shift way to the left. This make the market price on Toyota cars go way down because of the unsafe vehicles, making the demand for domestic cars shift right. While Toyota is remaking cars and regaining the trust of the America buyer the other competitors in the market are make a nice profit because the consumers are no longer buying at Toyota. Toyota stated that "This problem is well-known to all automakers” with defective break pedals. But what I cant help but wonder if ford can build a car with out having a defective break, how is this a problem for every automaker? One thing I found interesting is the “Toyota has urged replacement of floor mats or gas pedals, engineers familiar with engine technology said electromagnetic interference from a range of devices including cell phones and microwave towers can disrupt the electric signal to the electric throttle control system, which controls the accelerator” this shows that all motor vehicles companies are going through tough times with new technology. One thing I don’t like about car companies is that there putting more technology into cars which distracts the driver, but this does make the car more applying to consumers. Cars have become overly complicated and makers have lost focus on the basic car functions.
ReplyDeleteI think these problems with Toyota shed some light on why this car company is the number automaker in the work. They are having problems with their cars because they care more about selling more and increasing their profits than actually making safe cars. Their profit motive exceeds their safety motive. It's sad but unfortunately that's the way it is. The supply and demand graph for Toyota is going to look like this: Due to their recent problems, the demand for Toyota made cars is going to shift left causing their price to decrease and their quantity to sold to decrease as well. As for the supply and demand graph for Toyota's competitors...The demand for their cars is going to shift right because they are safer to drive. This causes their prices to rise as well as their quantity sold. The supply and demand graph for the entire auto industry will for the most part be unchanged because there is a problem with Toyota's care, not cars in general. However, since Toyota is the number one car company in the world, the demand line for the car industry will shift left in the short run. But in the long run, there shouldn't be a problem. Toyota like all car companies operates as a perfectly competitor. Therefore, this exposure of unsafe car parts is going to really hurt them because its not like people are forced to buy from Toyota. Consumers will now turn to other car companies and Toyota will no longer be the number one care company in the world. However, it won't be as bad as many people may think because it's not like people can just start car companies over night and provide even more competition against Toyota. I used an article called "Detroit is Tanking, but Toyota is Trouble, too" at http://www.wired.com/autopia/2008/11/gm-and-ford-may/. The article says that "Toyota’s stock nosedived 17 percent last week — its greatest decline in 18 years — after the company announced it will see an operating profit of just $6.9 billion, a 73.6 percent decline over last year." This alone will decrease consumer demand to invest in and buy from Toyota. It also says that "If Toyota’s in trouble, it means a global economic meltdown that has sent auto sales tumbling 32 percent in October alone could shake the entire auto industry to its core." This summarizes what I said earlier about how Toyota's decrease in demand could affect the entire auto industry in the short run.
ReplyDeleteAll of the safety issues with Toyota’s cars will make people afraid to buy them. This will shift the demand to the left for Toyota’s cars; however, competitor’s demand will shift right. This is shown because now Ford is “now making money and turning out critically acclaimed and popular new cars.” Overall people will not buy fewer cars because of Toyota’s problems; they will simply buy them from different companies. However, since Toyota is forced to recall so many cars the supply of cars will go down. Toyota used to be the second largest car maker but now it has fallen, “It’s a long hard climb to No 1, but the descent can be quick and catastrophic.”
ReplyDeletehttp://www.dailyherald.com/story/?id=358210
I beleive this is a major setback for Toyota. Think about it, toyota had a good reputable name, and after this event, people are going to wonder, "Is Toyota a reliable car company?" The recall of many Toyota cars definately shirts demand to an alltime low because now people who are planning to buy a car, are not going to look to toyota as a first choice. This is a God's gift to all other car makers because now all the people planning to get a toyota will not get one, and they will choose a different dealer to buy from. I believe this benefits honda the most because toyota and honda are strict competitors.
ReplyDeleteToyota is definetely a Perfect Competition because there are so many other Car brands that are selling jsut as good cars. this recall hurts the firm. I believe Toyota must reduce the price of their cars in order to be able to keep up with productivity, and the selling of the cars.
http://news.bbc.co.uk/2/hi/business/8496902.stm
I chose this site because it is questions and answers about the toyota dilemma. This explains exactly what is wrong with the Toyota cars, and what to do if you endure it. Toyota managed to create problems in our cars, which made everyone with a Toyota worry. I really want to knoew how they can bounce back. The only way I can think of bouncing back is throwing the biggest "red tag" sort of event. BIG INCENTIVES.
See article: http://www.nj.com/business/index.ssf/2010/02/toyota_recall_could_cause_shor.html
ReplyDeleteThe first thought that comes to mind is: I’m really glad I drive a Nissan. The second one is: the recent problems for Toyota are obviously going to destroy the trust Americans have in the auto maker. This is a great sign for other car companies because being a substitute for Toyota, the demand for the cars of other companies (especially American ones) will go up. For example, in the article, the author cites a Kelly Blue Book study that showed “27 percent of the shoppers who said they were considering a Toyota prior to the recall now say they no longer are considering the brand for their next vehicle purchase.” I believe that this blemish on the once very perfect face of Toyota will definitely undermine the trust consumers have not only in Toyota, but other foreign automakers as well. When someone says to you what’s a car company that’s not Toyota?, chances are you will say Ford or Chevrolet because the car market is very divided (US-Japan, we-they). This shows the dramatic decrease in demand for Toyotas. The author of the article also cites the fact that “Used-car prices of the small Toyota Matrix...have dropped $800 since late January...Toyota’s popular Camry sedan has fallen as much as $300, and the RAV4 is down $550.” This observation coincides with the leftward shift of the demand line for all types of Toyotas, used or not. Toyota is a firm that operates in a monopolistically competitive environment. This is because of the relatively small number of firms as compared to a perfectly competitive firm and the fact that Toyota engages in product differentiation. The demand line in this graph is also shifting downward.
See article: http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE61904Q20100210
ReplyDeleteThe recent recall on many Toyotas is obviously going to impact them negatively. The demand for Toyotas will decrease because people will be less likely to buy a car from a company who has had problems with many of its previous models. If there are safety problems with many Toyotas, it is very possible that they could all have similar problems. People want to buy a car that they know is safe and reliable and right now, Toyotas do not seem to fit that criteria. This will decrease both the price of Toyotas as well as the quantity produced. However, this is a good thing for other car companies because Toyota cars are a substitute to their products. Therefore, the demand for all other cars will increase, also increasing both the price and quantity produced of those cars. The auto industry is an oligopoly and if one of the firms is experiencing a problem, the few others in the market will greatly benefit because consumers only have a few other choices. However, many consumers were complaining about Toyotas before they were recalled and “more than half of the 2,262 complaints compiled by Safety Research involve vehicles that Toyota has not recalled.” It seems as if Toyota is ignoring consumer complaints and the article suggests that they even ignored signs of the safety problems with their vehicles. They conducted tests with the breaks and realized the glitches but “Toyota did not provide information to the U.S. government about reports it had taken about such cases.” It almost seems like Toyota was being lazy and decided to ignore problems with its vehicles. Now that this problem has been recognized, consumers will no longer trust the cars produced by Toyota. I recently heard an ad saying that “Toyota wants to regain your trust”. They obviously realize that they are in the doghouse with consumers and are trying to fix the situation. However, it seems unlikely that very many consumers will purchase Toyota cars.
With Toyota having a car recall because of brake problems, it is making people nervous about buying a Toyota car. Therefore, the demand for Toyota cars has shifted left because of “several complaints of alleged sticking accelerator pedals”. Also with the recall, a lot of cars were taken off the market and as a result, the supply of Toyota cars decreased. “In all, nearly nine million cars worldwide are affected by two recalls”. Even though many people will stop buying Toyota cars, the demand for other cars companies will rise because many people who used to but Toyotas will switch over to other companies such as Dodge, Ford and Honda and will cause the demand of all other car companies to shift right.
ReplyDeletehttp://www.nytimes.com/2010/01/30/business/30toyota.html
Toyota will be going through some hard times for a while now. Because of their recall their demand will be going down. “A study released last week by Kelly Blue Book showed 27 percent of the shoppers who said they were considering a Toyota prior to the recall now say they no longer are considering the brand for their next vehicle purchase.” In the S/D graph of the competitors the demand will go up because people will look to those cars more. “The Honda Civic and Accord, Chevrolet Malibu and Nissan Sentra all recorded increased new car transaction prices immediately after the Toyota recall, according to TrueCar.com.” The auto industry’s demand may go down for a bit because people wont be buying a car right away. Once they find a car through a different automaker the demand will return to where it was. Toyota operates as an oligopoly. Their ATC would rise because all they have to pay to recall and fix the cars. They would then be operating at a loss because it would be above the demand. It will take them a while to return to equilibrium because people have to see that they have good quality cars and want to buy more of them.
ReplyDeleteThis article shows how many people are returning their cars but Toyota is putting as much time and money as they can into this problem to get it fixed as soon as possible.
http://www.nj.com/business/index.ssf/2010/02/toyota_recall_could_cause_shor.html
The Toyota car company is not in the best shape right now for selling cars. The demand for their cars will be dramatically decreasing because of the mechanical problems and the fears of their consumers. As Toyota’s demand shifts left, American car makers’ demand will be shifting to the right with the sudden increase of demand for cars with so far no issues with the overall car. Toyota’s competitors will now be back in the running for that top car maker in America spot. Though Toyota is in a downfall, the worldly automobile industry will be slightly phased by this slip-up. The “surviving” car makers will increase their production because their supply will decrease and shift left due to the increase in demand. As with the firm graph, the Toyota Company is operating in an Oligopoly making it difficult for the rest of the global car companies to enter the market. In the article, http://www.bloomberg.com/apps/news?pid=20601209&sid=aq6zuRRiSCs8, they talk about the most recent recall of some of Toyota’s pick-up trucks for defected drive shafts. Though Toyota is the biggest car company in the world let alone America, they are still in a severe mess as said by Bloomberg, “The recall is the latest in a series for Toyota, the world’s largest automaker, which sought to correct defects with about 8 million vehicles globally.” Sadly for Toyota that isn’t the only recall. The Toyota car company has many quotes similar to this one, “It has suspended sales this year of eight models in the U.S., including the top selling Camry, after defects related to the accelerator pedals,” plastered to headlines for the past week, which is not only bad for the company’s marketing but also for the overall company’s success. Luckily, after they get this dilemma all sorted out and their revised designs back out onto the automobile market, I believe they will make up for any lost success during this period of recalls and loss in sales.
ReplyDeleteI think that the auto eceonomy will bounce back from this. I think there will be a slingshot effect in what has happened. When Toyota took these cars out they decreased the overall supply, giving a less quantity demanded. In the spring the supply will naturally go up, because that is the season that people tend to buy cars. Toyota is planning to have an incentive to try to get people to buy toyotas again at this time. This will increase the demand yet more. Toyota will then gain back some of the money lost, and then be right back in the game. As said in the link the sales will increase drastically. This will be because of an increase in demand. People will start to rely on cars even more, more teenagers will be getting their own cars, because that is how our society is evolving. People will start to trust their money and buy again. Cars seem a safe buy, in the sense that if they stop working, you can just get it repaired, so this yet again shifts the demand right. This will help to push the AD to the right and moving the overall GDP to increase. The price level will also increase causing the economy to be yet more stimulated. The competitors of toyota will not have all that much of an increase. They might have a slight bump in the other markets, but Toyota's incentive will balance the market out again. (By bump I mean demand line shifting right). For toyota the supply and demand are shifting left at first but then with this incentive will both shift back to where they were previously. Because they are recalling so many cars their supply will decrease and because of what has happened the tastes of consumers will have changed. This will quickly change in the spring when Toyota unveils their incentive.
ReplyDeleteWebsite: http://www.autonews.com/article/20100214/VIDEO/302149952/1219
Unfortunately for Toyota, the recalls on their cars are going to cause the short run demand for their cars to decrease. With the faulty brakes and gas pedals, people are not going to be interested in buying Toyotas right now. This however, means that the demand for Toyota’s competitors will go up because people will still need cars, but for now, they will not consider Toyota because they are currently unsafe. Also, the short run demand for the auto industry will decrease because the demand for it’s number one competitor has gone down. The auto industry is an oligopoly because there are few firms and the industry is overall hard to enter. Toyota has been forced to face this rough patch, “which have prompted the company to stop selling eight models in North America.” Unfortunately, Toyota will also have to face some economic problems while they try to fix this problem, which caused “In all, nearly nine million cars worldwide [to be] affected by two recalls.” I chose this article because it shows the complications Toyota is going to have to endure, in order to bring themselves back on top, and remain there.
ReplyDeleteSee Article:
http://www.nytimes.com/2010/01/30/business/30toyota.html
Going back to microeconomics and talking abut the Toyota problem we would look at a supply and demand graph o show the impact that this problem would have on Toyota s. for example if there are many problems going on with the failing of brakes that is going to decrease the demand for Toyotas because of people thinking of their safety. Because although I don’t drive a Toyota if the company of my car came out that there were claims that the brakes were failing or accidents that the air bags were not working and people were getting hurt pretty bad . I would probably return the new car and get another one that was not involved with that company. And that’s what’s happening to Toyota costumers their going to other companies to buy their cars because of the fear of failure. This increases the substitutes demand. There is one thing that will happen to the firm their marginal and average total cost are going to increase. In terms of what this is I think they are an oligopoly. But although we might think that the price will go down I think that it will stay relatively the same because they want to make profit and all there loosing is the demand not quantity demanded so price would not change. The article I decided to use washttp://wheels.blogs.nytimes.com/2009/11/03/toyota-acceleration-problem-is-still-unresolved/ . I used this article to make my graphs shift in that the article explains how the demand for the Toyotas has decreased hugely. Which is the first thing I said demand would go down and second the article states how the competitors are getting something good from this because of all the consumers that Toyota lost there going to other companies to buy cars that are more safer.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteThe demand line on a supply and demand graph would decrease because people do not want to by cars with messed up gas pedals. This would cause other car companys demand to go up because people still need cars to drive. This would make the quantity and price go up for those companys cars. In the long run Toyota will fix the gas pedals and thesupply and demand graph will go back to equalibrium back on its own. The article that I used was:
ReplyDeletehttp://www.csmonitor.com/Money/new-economy/2010/0122/Toyota-recall-January-2010-Is-your-car-on-the-list-Here-s-what-to-do
This article explained what the major problem was for theh cars and what people can do if they bought one of the cars. It also said 1.7 million of the 2.3 million Toyotas being recalled just this month. They said they will fix it and it will be announced soon.
Toyota’s demand will decrease because tastes in society will change because no one wants to be buying a car with faulty brakes. Their competitors demand will go up because Toyota is a related good. If people cannot buy Toyota, they will buy GMC, Pontiac, Nissan, BMW, etc. The auto industry in the short run will have a slight decrease in demand because people will lose faith in the industry and stop buying cars; however, it will not affect the long run. Toyota operated as an oligopoly. It cannot sell all the cars it wants at the current market price because they have a perfectly elastic demand line. To sell cars, Toyota must lower the price or advertise to shift their demand right. In an oligopoly, there are a few large sellers and each firm has differentiated products. Toyota’s average total cost will go up because they now have to fix al the errors in their cars and people are returning cars. Their price will go under their MC and ATC. In an article by Joseph R. Perone for the Star-Ledger, he talks about “Not only are [there] some customers shying away from new Toyotas, but the recalls also are hurting the resale value of used cars made by the Japanese automaker, as well, with prices dropping by hundreds of dollars in the past few weeks.” People are not buying Toyota so there demand will go down and the price of cars will drop below the cost it would take to make it. A study released last week by Kelly Blue Book “showed 27 percent of the shoppers who said they were considering a Toyota prior to the recall now say they no longer are considering the brand for their next vehicle purchase.” My family owns a prius and we couldn’t be happier. We haven’t had any problems and are thinking about buying a used Toyota for when I go to college. However, that’s only one view out of millions of Toyota owners.
ReplyDeletehttp://www.nj.com/business/index.ssf/2010/02/toyota_recall_could_cause_shor.html
The recent Toyota car recall is a setback for Toyota. The Company is going to be spending its money on the car recall and they won’t be spending it on the company. This spending on the repair of the cars instead of manufacturing new ones will ultimately cause the demand for Toyota’s cars to go down. This change in demand will help that of substitutes for Toyota. Other companies will have their supply decrease because no one will want to buy Toyotas if they are having issues. Toyota operates in an oligopoly system, thus making it difficult for competitors to enter. Being in an oligopoly will help out Toyota since cheaper goods aren’t available. But in the long run the big issue could be towards its public image. In the article http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx it explains that the public could be searching for other car companies instead of Toyota because of the recall. In my opinion companies should be more aware of what is going on with their product and there should never be major recalls, especially if it happens more than once. When the recall took place it was sure to cause problems for everyone. This will hurt the economy and will hurt the image of all car producers throughout the world because people will be worried. This will hopefully bring about some major changes within Toyota and also within other companies to hopefully improve their products.
ReplyDeleteI think that it is going to take Toyota a long time to recover from all the recalls. Toyota is in a perfect competion because there are many other car companies opertating that will be more than glad to steal Toyota's business. If Toyota can not recover, than because it is a substitution for Ford, Chrysler, Chevy, and other car companies there buisiness should rise. The demand for Toyota on the supply and demand graph should shift left because no one will want to buy cars that they are not sure are safe.The price should decrease to. Although the other car companies so far are fine and have no recalls because they are a subsitute they will have to lower their prices to, so they can keep up with Toyota's prices that should be dropping. I think the demand for mechannics, and automakers will increase shifting the demand line right because there are so many cars that need to be fixed. Also the supply of new Toyota's will probably decrease as a result of the company trying to fix the old cars.Also Toyota should have many lawsuites pilling up on them. According to an article in the suntimes experts believe Toyota should have settlements estimating more than $2 billion in recall costs. If this estimated cost is true Toyota is going to suffer more than expected. On top of these problems the article also states that "congressional investigators cited growing evidence that not all the causes of Toyota's acceleration problems have been identified." If this is true the car company will have even more problems fixing the car and recovering from this horrible event.
ReplyDeletehttp://www.suntimes.com/business/2038990,CST-NWS-TOYOTA10.article
See article http://www.time.com/time/business/article/0,8599,1958991,00.html
ReplyDeleteBecause of Toyota’s problems, people are rethinking their ability to create safe cars and in turn, shifting the demand line far left. As shown by how “U.S. sales dropped 16% in January, and the company's stock surrendered $21 billion in value in a single week.” Also, the supply line has shifted left because of all the recalls. It is also going to take a lot of work from Toyota to get their reputation back up what it was because there are many other car companies for people to turn to instead of Toyota. Toyota was known for their quality but “Being the best and being the biggest created a tension that Toyota couldn't resolve.” Eventually one had to give, and it was quality; which turned out to be a big mistake.
I think that this recall will be fatal for the Toyota Company; despite the fact that the economy is bad as it is and people aren’t buying cars, the loss of security and trust of the public will ruin the company. Hearing all the dangers and mistakes that have been made, the public will no longer want to purchase that kind of car causing the demand for Toyota to decrease drastically. Their supply will shift downwards as well as they recall thousands of these models. This news is fairly optimistic for other car companies, as their biggest competitor’s customers will now seek to find a substitute for their cars and will probably head over to their dealers to purchase a replacement causing their demand to increase. Thankfully, the oligopoly allows the public to have different options to choose from so my prediction is that Toyota will soon be declaring bankruptcy as the effect of the economy and the recall will have too much of a negative effect on them. The auto industry overall will experience a leftward shift in their supply as their best-seller withdraws large amounts of vehicles, this will at least help the other auto companies who have been affected by the economy increase their revenues as former Toyota customers seek for replacements. Also, as the article: http://www.asianjournal.com/consumer/atty-larry-yang/4412-will-sticky-accelerator-force-toyotas-bankruptcy.html states, the cost of fixing these damaged automobiles for Toyota will increase the cost of production, causing the costs of the cars to go up, and with the demand as low as it is for these cars, it is most likely that not many people will purchase them. It also states that those families that have acquired injuries from the defaults in the cars will file lawsuits and Toyota will have no defense and many consequences to pay off. The article also states that other companies are offering money to those who switch over from Toyota; I suspect that customers will take these offers as their trust for Toyota has been lost and they are being offered a lot of money in the midst of a recession. It is pretty clear to me that Toyota doesn’t declare bankruptcy; it will come pretty darn close to it.
ReplyDeleteI think that Toyota will lose a great deal because of this recall. Ruchee summarized the graphs very well. The demand for Toyota will definitely decrease because people don’t trust Toyota anymore. The supply might also decrease since they will be fixing so many cars and they won’t have enough money to cover the costs. The price level will stay constant because both of the lines are decreasing. Overall this is not a good situation for Toyota. The supplement brands Hyundai and ford will definitely be experiencing an increase in their demand because people will start trusting Hyundai more. They are also creating new alternatives to Toyota’s cars.
ReplyDeletehttp://www.foxnews.com/story/0,2933,584894,00.html
Because of the recall for one car, they are finding many other problems in other cars. This will be very detrimental to Toyota. Although Toyota is trying to fix the problems with their cars, they will have a big problem trying to get the world’s trust back. No one wants to buy cars that MIGHT have problems. No one wants to take that risk that. Toyota is going to have to do a great deal of marketing to get the trust and demand back.
Toyota's massive recalls are obviously a downfall for the company. Due to the faulty brakes and sticky accelerators, demand for Toyota's will decrease violently, if it doesn't put them out of business. The auto industry was already hurting, so now that the demand for Toyotas has shifted left, decreasing output, it will be even more difficult for them to stay afloat. However, due to the decrease in demand for Toyota, the demand for the competing auto companies will increase, because there has not been any found flaws in the system. This is good for the other companies because it will attract more buyers, who were originally going to purchase a Toyota.
ReplyDeletehttp://www.post-gazette.com/pg/10045/1035564-185.stm?cmpid=business.xml
The above article mentions how Toyota has "been swamped with customers seeking repairs". Due to this swamping of customers, Toyota must focus their attention on the repairs, instead of being able to focus on regular production to get more cars out on the lots. This is causing Toyota to lose a ton of money, having to pay for recalled repairs instead of being able to profit off of newly built vehicles. The article also mentions that sales are also hurting due to "the terrible weather". This wintery weather that has been sweeping most of the states has also been injuring Toyota sales. So while the company is trying to fix recalled vehicles, but sell others at the same time, the weather has had to do a lot with the amount of sales. One may ask the question of, "Is Toyota losing sales because of the recall, or is it just because of the bad weather and people don't want to be outside?"
Toyota seems to be in a pretty sticky situation at the moment. Due to the now questionable reputation of Toyota, demand will go down. This drop may have been more severe because of LaHood's cryptic statements that cause Toyota owners panic. “Shares of Toyota stock in midday trading are down 7 percent and falling” because of the drop in demand. Using the Law of Substitutes, all other car companies will experience an increase in demand. According to the Washington Post, "shares of Ford are up 1 percent today even as the overall market is down," which supports this analysis. The reason that the overall market is down is because of Toyota: Since they have to fix all these faulty cars, their MC and ATC will increase and so they will not have the money to produce more cars. Factories will shut down, causing a shift in supply, lowering the overall market supply. This slack will have to be picked up by the other car companies because the market is an oligopoly with barriers such as start up costs that prevent new competition from entering.
ReplyDeleteSource:
(http://voices.washingtonpost.com/economy-watch/2010/02/lahood_if_you_have_affected_to.html)
The recall on the Toyota cars is going to hurt their company alot. Since people will be questionable about their cars now, their demand line will shift left. Since their demand line will shift left, demand for the substitutes will shift right. It will be a good thing for other car companies, but will really hurt Toyota. I don’t think that the overall auto market will shift, since the demand for cars is still there. Also, demand for compliments will shift. For instance, demand for accessories for Toyotas will probably shift left as well. But, demand for car repairs might shift right, since there are so many problems with brakes and sticky gas pedals. Toyota is in a monopolistically competitive market, since there are not a whole lot of firms but it is still competitive. In the articles http://topics.nytimes.com/top/news/business/companies/toyota_motor_corporation/index.html?scp=1-spot&sq=toyota&st=cse from the New York Times, the problems of Toyota are discussed. It says how “its reputation for safety and quality - key elements in its success - took a battering”. Due to the recalls, people’s trust in the quality and safety of their vehicles from Toyota has definitely dropped. As the article says, it is their key to success, so now they are not able to succeed and their demand has shifted left. Because of this, as well as the recall with the Prius’, the company has taken a hard hit. The articles also states, “global auto sales plunged, leading to a loss for the fiscal year of $4.8 billion, the largest in the company's 72-year history”. It will be hard for Toyota to recover quickly from such a huge loss.
ReplyDeleteDue to Toyota’s recent problems with their breaks and sticky gas pedals, the demand for their cars has gone down. With demand down, price and production have both gone down also. Since people are buying less of Toyota’s cars, they are buying more cars from other companies, meaning that the demand for the supplements cars goes up. This is possible because the auto industry is an oligopoly, and if a single firm is having a problem, the few others in the market will significantly benefit because the consumers only have a small amount of choices for other car companies. http://www.toyota.com/recall/ToyotasPledgeToYou.pdf says that Toyota’s 172,000 workers are “working around the clock to make things right for [us] and earn back our trust”. This proves to us that Toyota is trying to bring their demand back up, because they are telling us that this is just a little mistake and that because they are working hard to live up to our expectations, we should trust their car production in no time. Also, it says that Toyota “believe[s] that the best companies learn from their mistakes”, making it seem like nothing, when tons of cars are being recalled due to major problems. This is ironic, because if they were the best company, then why are all this cars having problems? Toyota is just saying this so that they can attempt to earn back trust, and hopefully gain some future customers, because they need their demand to go up. Their demand needs to go up because, obviously, it has gone down recently, like I have said earlier.
ReplyDeleteThe recall on some of Toyota’s cars is obviously not a good thing for the company. Less people will trust in the safety of the cars and therefore the demand for Toyota cars will decrease. While Toyota is down, this is the time for our domestic car companies to gain from Toyota’s losses. Toyota is losing demand, however, the demand for cars overall does not go away, so the other car companies’ demand for cars will increase, because their cars do not have the safety problems that Toyota has at the moment. The shift in demand away from Toyota will lead the company to cut back on production in order to cut the costs of repairing old cars while making new ones. In the article Toyota Recall on Toyota’s website (http://www.toyota.com/recall/?srchid=K610_p277905744) they claim to be making a lot of efforts to fix this problem with the brakes. The company says that “Dealerships have extended their hours - some of them working 24/7 - to fix your vehicle as quickly as possible”. They may have extended their hours, but it will still take a very long time to fix all of the cars and make sure they are all working efficiently. Also, they claimed to be “doubling [their] quality control efforts across the company,” however, although they are making an effort to make sure that the quality of their cars is made better and the safety of their drivers is taken care of, it may take a long time for people to start trusting in the company again. Eventually the problems will be solved, but until then, our domestic car companies will gain from Toyota’s struggles.
ReplyDeleteI think the problems happening with the brakes of Toyota cars are due to the lack of time they put into constructing the cars. Obviously the manufactures of Toyota cars are focusing more on building the cars fast and increasing profit rather than making high quality cars. A supply and demand graph for Toyota would look like this…The demand for Toyota cars will shift left due to safety reasons. This shift would decrease price and would also decrease output and would increase demand for other car producing companies. Other car companies need to do a better job of making sure that former Toyota users switch to their car company because “The auto industry is a key to the U.S. economy. If American automakers can restructure, become leaner and more efficient, and keep up quality, reliability and appeal, they can thrive. A supply and demand graph for the whole car industry in general will mostly be unchanged because problems are only taking place with Toyota cars not all cars. . This article supports my argument by saying that other car companies increased demand due to this recall. The article illustrates this when the author says, “American carmakers have done a pretty good job of catching up. They have closed the gap.” The article I chose is http://www.chicagotribune.com/news/opinion/editorials/ct-edit-toyota-20100212,0,7957582.story
ReplyDeleteIn the short run,demand will go down because "these developments have begun to make the customers feel less safe" according to the NYtimes in the Toyota's Recall Woes article. Consumers do not feel safe buying these cars and do not demand them as much anymore. The demand for substitutes will increase because folks will be looking to substitute a different hybrid vehicle for a different brand one.They might revert back to GM even though Toyota "passed GM as the number 1 automaker." Toyota is an oligolpoly because it is extremely hard to enter the car making industry. Since demand is going down, output is going to decrease because in order to "break even" Toyota will have to reduce their production and to not have a surplus of cars with a lack of consumers willing to buy them. The price will also have to go down because Demand is going down and they will want to try and increase demand buy haveing the car less expensive and more consumer affordable. I used the NYTimes article because I found it to be reliable on accout as it is a part of a newspaper artice and that it is a reliable source of material. I also found it to be intreaging since it deals with a once fluorishing company that is now losing consumers and losing money, and makes me think of why GM had to be bailed out by the goverment and were going bankrupt.
ReplyDeleteThe recent recall on many Toyota models has left many drivers doubting the quality of their vehicles. I believe that this will lead to a decrease in demand for Toyota on the S/D graph. Eventually they will recover but for now their sales will plummet from the recall. An article on prnewswire.com states that as of February 5th 2010, Toyota's sales have fallen by 28 percent. As for their domestic competitors, “General Motors brands [released] the launch of GM's $1000 incentive to Toyota owners to terminate their lease”. This should prove to worsen things for the foreign automaker as domestic sales rise from an increase in foreign distrust. Ford auto company’s sales have increased by ten percent since the recall and “GM brands had increased their share as follows: Chevrolet (+9 percent), Buick (+17 percent), Cadillac (+10 percent) and GMC (+19 percent)”. Although Toyota directly was affected by the recall, the luxury branch of the company Lexus was not as affected although it did have an unrelated floor mat problem. Surprisingly the Toyota 4-Runnner showed an increase of 18 percent (strange? I think so). And for those who say so much about General Motors bankruptcy, which would you rather have, bankruptcy or a massive recall that reaches back to 2004.
ReplyDeletehttp://www.prnewswire.com/news-releases/worlds-first-predictive-sales-demand-indicator-says-toyota-demand-in-28-percent-freefall-83662562.html
http://www.washingtonpost.com/wp dyn/content/article/2010/01/26/AR2010012603492.html
ReplyDeleteToyota’s recall has impacted their productivity and the trust of their consumers. Both ways unfortunately for them are negative; Toyota had to stop production on “the eight models that represent 65 percent of sales of the Toyota brand and more than half of sales of the parent company, which also makes Lexus and Scion”. This forces them to pay extra money on fixing the Toyota cars and since production is put to a complete stop for the time being the supply of Toyota has dramatically decreased. This would normally (in the short run cause the price of a Toyota to increase as well, but to get the trust back to from the consumers Toyota probably won’t want to do that. In Kelly blue book the value of a Toyota has decreased by 3% due to this recall. The recall was due to “an unresolved mechanical flaw that might cause the accelerator to get perilously stuck in the depressed position”. But if you were a customer with a VIN number that started with a J then it is from Japan and your car is fine, but if you were a customer without the J your car was made in the U.S.A. and it is not ok. This in turn will cause the demand to drop not just for Toyota’s, but for all cars manufactured in the U.S.A. This balances out the price because the demand is low along with the supply the price level will remain constant, but the quantity will decrease
As for now, Toyota’s demand line will shift left because consumers are afraid that their cars are not serviced properly. Especially in our economic situation where people want to be 100% confident that they are spending their money on the best they can afford. Since buyers now do not have confidence in Toyota, they will now take their money elsewhere and substitute Ford, or GM in place of Toyota. Although Toyota did not purposely make these mistakes they have dug a very big hole for themselves. I agree with Ken Belson that the Toyota executives should come out and release some sort of statement saying that they messed up and share whatever ideas they have to make the company better. This way, some Toyota drives can begin to restore some of the faith that they have lost. This incident won’t really affect the auto-industry as much as the recession and other factors of the economy and in my opinion the supply or demand graph will not shift.
ReplyDeletehttp://www.nytimes.com/2010/02/14/weekinreview/14belson.html?scp=2&sq=toyota&st=cse
Needless to say, the Toyota industry is seriously hurting after "Toyota announced two safety recalls that cover some of its models". The reasons for the recall campaigns both had to do with the "conditions related to the accelerator pedal". This has hurt their business right now as well as their business in the future. Many people will stop trusting this car company because of the major issues they had been having. In order to make things right Toyota employees are working round the clock to try and fix things. "Dealerships have extended their hours - some of them working 24/7 - to fix [these] vehicle as quickly as possible".
ReplyDeleteThis decrease in the demand for Toyotas has caused less interest in these cars, which in turn means they can’t sell for as much as before, which also means the company won’t be able to make as much of a profit as they did in the past. With the price of the cars decreasing and the profit also decreasing the company is going to suffer even more because they don’t have the money they need to repair the cars that were recalled.
Because the Toyota industry is currently suffering, other companies are gaining business and profiting from the new customers that might have gone to buy a Toyota before the recalls began. Other companies such as GMC and Honda are known as substitutes and when something bad happens to the Toyota Company they loose customers and GMC and Honda gain those customers. Because of the increase in demand for their cars GMC and Honda are able to price their cars higher, which will give them a greater profit and help their business that much more.
As a whole, this is hurting the auto industry. Because not as many people are going to the Toyota Company, they aren’t able to produce as many cars which decrease the supply of cars in the auto industry. And if there are fewer cars in the industry to choose from people may start to hold off on buying and wait to find their perfect car, thus hurting business for all companies.
The Toyota firm is going to experience a major loss in their total revenue because the demand for their car are going to decrease, giving them less of a profit; and they are going to be repairing the cars that were recalled, costing them additional money which will hurt them even more.
http://www.toyota.com/recall/?srchid=K610_p277905692
In the supply and demand graph for Toyota, the supply of their cars went down. The supply line shifted left. That is because the company stopped producing any more cars after the recalls. The quantity of their automobiles will go down, and price would probably go up on the other models. For the competitors of Toyota, their demand line shifts to the right because consumers of Toyota no longer wish to purchase anymore Toyotas. They are scared of their breaks not working. Revenue for the Toyota company would decrease by a lot. Since those other competitors are substitutes of Toyota, the demand for them will increase because prices of Toyota have increased. The prices of the competitors’ cars also go up. The quantity goes up too. For the auto industry as a whole, the supply line shifts left because there are less cars out there because of all the Toyotas that got recalled. The prices of cars will go up, and the quantity decreased. In the firm graph for Toyota, the supply line went left because there are less workers working for them because they got laid off. Wages would go up, but quantity would go down. My article can be found here: http://news.lalate.com/2010/02/01/toyota-recalls-update-toyota-recall-models-affected/. It states that “The list is prompted with an additional halt on the sale of specific new models” which supports the claim that the supply of Toyotas went down. The article also states that “Toyota has informed dealers to suspend all current sales of these vehicles” which means prices of the models not recalled would go down.
ReplyDeleteArticle: http://www.nj.com/business/index.ssf/2010/02/toyota_recall_could_cause_shor.html
ReplyDeleteThe recent recall on many Toyota vehicles is definitely going to hurt Toyota’s reputation and as a results, their sales. The addition of the fact that the auto industry is an oligopoly further jeopardizes Toyota’s profits. A limited number of companies are in the car business and therefore if one of those companies experience failure the others will experience success. And with this recall, potential car buyers will steer away from Toyota. People want a safe and reliable car. During these hard economic times they also want to visit the repair shop as little as possible. But when such a large recall is issued, car-buyers will question Toyota’s reliability and turn to another company instead. The article states: “As Toyota wrestles with its problems, other car manufacturers are picking up market share. The Honda Civic and Accord, Chevrolet Malibu and Nissan Sentra all recorded increased new car transaction prices immediately after the Toyota recall, according to TrueCar.com, an automotive website that tracks industry sales.” The sheer nature of substitutable goods (like cars) is causing the shift from Toyotas to other cars like Honda, Chevy and Nissan. Toyota is losing revenue from potential sales. They are additionally losing the profit from the decrease in the demand for Toyota cars. As the demand line falls, quantity and price also falls and Toyota loses all the profit. On the other hand, other car companies see an increase in their demand lines, followed by an increase in quantity and price leading in higher profits. Honestly, I think all these consequences for Toyota sort of stinks (keeping it school appropriate ;)) and I believe Toyota to be a reliable company. But I can also see why consumers are reluctant to buy Toyota.
In the article http://money.cnn.com/2010/01/21/autos/toyota_recall/index.htm, we can see that Toyota did not want to admit that there is a flaw in their cars. However the fact that many others have realized this has caused them to purchase less Toyotas, shifting the demand left which causes the demand for its substitutes (other car companies) to increase. Realizing this, Toyota will probably produce less cars until the problem is fixed because no one will buy them, ultimately shifting the supply line left also. However, I do agree with other people that this will not affect the market for cars in general. People still want cars and need cars so they will continue to buy them, just maybe not as many Toyotas. This article states that “As a company with a reputation for steadiness, these must be uncomfortable days for Toyota” and I agree they must be freaking out since they are usually one of the top selling car companies. It also states that “Toyota is working quickly to prepare a correction remedy” and I believe it, my family has had a fewToyotas before with virtually no problems. I do believe that this recall will not last long and the supply and demand will soon shift back to equilibrium.
ReplyDeleteThis is bad news for Toyota because a lot of trust consumers have for their cars is now lost. This brings demand down for their company, lowering price and output of cars. Toyota's failure is good news for other car companies however, as the leftward shift in their companies will bring the demand up for companies like Chevy and Honda, as the market is an oligopoly as there are very few sellers, and an impact on just one can skew the economic supply and demand for all other companies.
ReplyDeletehttp://money.cnn.com/2010/02/15/autos/toyota_complaints_swell/
The above is a link to an article that supports my ideas. The author reported “NHTSA said that it has received nine new complaints alleging fatal crashes caused by sudden acceleration in Toyota cars since Jan. 27” Crashes like there are what cause consumer to loose trust in companies like Toyota, and with people continuing to blame their crashes on a defect in the car, others will be hesitant to risk buying, or driving a Toyota. This is only natural however as the article claims that "It is normal for NHTSA to receive an increase in consumer complaints after a recall is announced and the public learns of a safety defect”, and Toyota will just have to burden the short term changes in demand they are facing
Toyota should be very concerned with the direction their company is heading in. With the millions of people that are going to have their Toyota cars recalled, Toyota is heading to an all time low. They have had a shift to the left in their supply, which will then cause higher prices, which, according to substitutions, will cause their demand to go up because their competition will have lower prices which is what people want to see. So not only will supply shift to the left, or down, but demand will shift to the left, or go down. Demand of other car companies will go up, so their revenue is going to increase, and all the previous Toyota owners will no longer buy from Toyota when they get their new cars. The quantity sold by Toyota is going to go down, but all the other car companies will experience their quantities shifting upward. Toyota is basically doing a favor to the other car companies, because everyone but Toyota will be able to increase their revenue if the economy does not experience a sudden fall. Unfortunately, the car industry as a whole is going to be hit hard. If they can not make up for the Toyota losses, then the collective market graph for cars will experience a supply shift to the left, or supply will go down, meaning that collectively prices will have increased and quantity will go down. Also, people are going to see the car companies making mistakes based of what Toyota did, and also because people are trying to become more environmentally friendly, so their may be a big demand shift all together for the car industry. My article helps prove my point with the quote “Most of the vehicles targeted by the new recall were also included in a separate recall of 4.3 million vehicles late last year involving floor mats that could jam the accelerator pedal open.” So not only are they recalling faulty brakes, but cars with bad floor mats. This will cause a supply shit too great for the car industry to overcome quickly. Its also stated that "As a company with a reputation for steadiness, these must be uncomfortable days for Toyota”, which proves my point about how demand is going to shift to the left.
ReplyDeletehttp://articles.latimes.com/2010/jan/22/business/la-fi-nutoyota-recall22-2010jan22
The demand for Toyota's is going to decrease drastically and the supply of the cars will increase because of the sticky gas pedal problem. Just because only one of the cars has the problem, people are and will get discouraged by the brand and go elsewhere for a car as the "study released last week by Kelly Blue Book showed 27 percent of the shoppers who said they were considering a Toyota prior to the recall now say they no longer are considering the brand for their next vehicle purchase". As far as pricing, Toyota will try to lower their prices and make even better deals on all their cars to try and bring back customers, making it a Monopolistic Competition, because they are competing with all the other car companies out there. And as far as competitors go "[they] are picking up market share... [with] slight pricing improvements..." this really opened up the sales for their cars, because people have and will keep looking for other cars from a different maker. Hundai and Honda being very similar with Toyota, may have an advantage from this problem because they too are made around the same region as Toyota, causing their graphs an increase in demand and price's will go up as well.( http://www.nj.com/business/index.ssf/2010/02/toyota_recall_could_cause_shor.html)
ReplyDeleteThis news is terrible for Toyota, but is good for the American car companies. Toyota is suffer some major damage as "the recalls are hurting [their] entire lineup". Toyota is finding it harder to sell cars because people are iffy about the quality of their products. American automakers are being helped by this though. They are taking sales away from car buyers who would usually buy toyota vehicles.
ReplyDeleteThe s/d graph is being effected by this recall. Because customers are iffy about the quality of toyota cars, the demand for them will shift to the left. this will make toyota lower their prices and make less money on their cars. On the other hand, Demand for american cars are going up because it is viewed as a superior product to the faulty Toyotas. It is expected that "sales of the toyota brand [have fallen] 75 percent while sales of the eight models were suspended". This is bad for the automotive industry as a whole because they dont have as many cars on the market which means less money made (Supply down). I think this recall will affect the companys sales in a big way now, but it wont affect them much in the long run because people wont remember the problems of the cars now if toyota makes good products in the future.
http://www.nytimes.com/2010/01/30/business/30toyota.html
Article----http://www.reuters.com/article/idUSSGE61202520100204
ReplyDeleteAfter recent events with Toyota recalling several different models for sticky gas pedals and this week the #1 selling hybrid the Toyota Prius are to be recalled for problems with their brakes Toyota will be looking at many consumers judging Toyota quality. This leads to Toyota demand to shift less and supply down, because they have stopped building vehicles to fix all the recalled vehicles. “The recall of more than 8 million vehicles, including the Camry, Corolla and Rav4, due to problems with unintended acceleration has wiped $30 billion from Toyota's share value”, this has hurt the companies reputation and has given opportunity for other companies to improve. That being said other competitors such as Honda, Ford, Chevy will see in increase in demand for there vehicles. Overall in the auto-industry there wont be any significant changes just Toyota will have a rough year and end the quarter on a bad note “The company's forecast earnings and profitability will surely decrease because of the recall”. I think that Toyota is operating at an oligopoly since there are a fixed number of sellers in the auto-industry each companies actions influence one another.
The recalls for Toyota are definitely bad news for the company, with Toyota drivers gaining concern. People will regress into worry from the problems associated with these cars and Toyota buyers will be reduced heavily. Nobody wants a car that could end in death for every passenger. People will not want to take any chances with sticky gas pedal and brake pedal problems and Toyota will lose a significant amount of customers. So in a sense this will shift the demand right on the S/D graph because no one wants to buy a Toyota. When demand shifts right, quantity and price will both decrease. But this shift in price will not do anything for Toyota since most people will still not want to purchase one of their cars. Toyota may start cutting the supply of cars they make in order to fix the old ones that are not working. Maybe at one point, Toyota will be making too much of a loss to fix that they might go out of business. In this case there will be less supply of cars in the automotive industry, but for now the demand for other companies cars are going up, while Toyota is left trying to clean up the mess they started. The article I choose is: http://economictimes.indiatimes.com/news/international-business/Hyundai-sales-soar-in-US-amid-Toyota-recall/articleshow/5529910.cms. This article shows how the demand for other car companies has gone up due to the recall in Toyota’s cars. The two quotes I choose were: “South Korea's top automaker Hyundai Motor said Wednesday its US sales jumped by almost a quarter last month, as Japanese rival Toyota grappled with a massive recall” and, “Hyundai is a major beneficiary of the woes of Toyota, whose US sales fell 16 percent last month after the recall of millions of vehicles and the sales suspension of eight models.”
ReplyDeleteThe recall of Toyota vehicles is going to weaken the company. The demand is going to decrease massively. Consumers are not going to be able to trust Toyota’s cars, safety issues are not something to ignore. Although this hurts Toyota, other companies are celebrating the opportunity to win over Toyota’s customers, causing Toyota’s competitors to increase demand. I don’t think the overall auto market will shift because although people may not buy from Toyota they will still buy from other companies. The owners who were effected by the recall are trying to get what they can out of it, “Toyota owners who want to trade in their vehicle are being wooed by several of the carmaker’s rivals.” The recalled Toyota owners are not happy with the situation but with other companies offering deals, how can they not be interested? Toyota has said, “In all, nearly nine million cars worldwide [have been] affected by two recalls” This article talked about not only what Toyota is doing through the tough time but also how its competitors are being strategically and economically smart. I liked how the article offered different sides of the story.
ReplyDeletehttp://www.nytimes.com/2010/01/30/business/30toyota.html
Knowing that Toyota operates in the car industry, we know that they operate under monopolistic competition. No one company holds a complete advantage, but small companies find it tough to enter the market.
ReplyDeleteTherefore, Toyota’s graph will have MC, MR, ATC, AVC, and Demand. Normally, Toyota would produce where MC=MR, and make profit depending on the difference between the ATC and Demand at that level. What we are seeing now is a severe increase in Toyota’s ATC, as it must recall its product and reproduce new models, as well as a severe decrease in the demand for the cars, as some consumers have lost confidence. What results is a severe short term loss.
For the other companies, we see an increase in demand, without a change in the other factors as the recalls don’t affect their supply or costs. With demand increasing in the short term, profits will come to companies like Ford and Chevrolet.
In the long run costs for Toyota will go back to equilibrium, as will demand when consumer confidence comes back. The other companies may also see a return to equilibrium for demand.
Additionally if Toyota ran in PC or Monopoly, again the ATC would increase and the demand would decrease for the firm. However, the problem would have a greater affect in PC than now, just as it would have a lesser affect in a Monopoly than now. In PC the firm must adjust to the market, and this is vice versa for a Monopoly.
In some eyes the car industry can be viewed as an oligopoly, in this case some car companies will recognize the high prices Toyota may have to offer. However, they will not drop or raise prices too much at the risk of losing profits themselves.
The article I’m using as back up is from the BBC, and can be found here: http://news.bbc.co.uk/2/hi/business/8506240.stm
The article notes not only the decrease in demand for Toyota, but the possibilities that are on the horizon for Japanese products in general.
“It seems Mr Maehara is even concerned that Toyota's tarnished image could damage both the reputation of Japanese companies and products abroad.”
It also mentions the work the company is doing to return to the previous norm.
“Then in a second step, of course, we will have to work further on rebuilding the trust and the confidence of the customers in our brand."
There is also an explanation of the American strategies.
“So while both GM and Ford are offering additional $1,000 (£640) discounts for Toyota or Lexus drivers who buy one of their cars, neither firm has opted to change their marketing strategies and allow dealers to make direct comparisons with their Japanese rival.”
I don't believe Toyota is in huge trouble. Although at the moment they are facing a crisis, consumers will likely forget about this in a few years or so. Especially the new buyers that won't even know this even happened. However now, this story has and will continue to hurt Toyota's reputation leading the demand line to shift leftward. Toyota is a monopolistic competition (since it has control over the prices, but also has competiton from other car companies) so people will have more incentive to buy a substitute for Toyota, such as a Honda. In the article I chose, an economist predicts that it will take about a decade or two for Toyota to rebuild it's image and for it to return to equilibrium since " the brand has been founded upon trust, upon reliability and safety and certainty". This will most likely be the case unless Toyota does damage control and allows the public to know that they are apologetic for their mistakes inorder to shift the demand back to normal. If the demand stays where it is now, the prices of Toyota cars will drop leading to lower revenue and a high supply of unsold cars. But Toyota has done some damage control through but it hasn't been as effective due to the fact that they had information as earlier as in 2007 about the acelerator pedal issue, however they didn't allow the public to know until recently. In fact the article states recalling the cars will be a "$2 billion recall, but the stocks fell $3 billion when the news hit about the recall." Which also means the investment for Toyota has fallen as well. This damage will take a long, slow time for Toyota to recover.
ReplyDeletehttp://www.cbsnews.com/blogs/2010/02/11/business/econwatch/entry6197396.shtml
This recall of Toyotas is a huge concern for consumers around the globe who own Toyotas. It is also a big dilemma for the company because this recall questions how reliable their company is. This question of reliability and safety will cause the demand line for Toyota cars to shift left. This will force Toyota to lower their prices and production to stay in business. Unfortunately, there will have to be a substantial labor cuts because of the decline of production. Also, there will be profit losses in Toyota dealers in the United States along with around the entire world. However, I believe that if Toyota fixes these problems effectively, they still have a chance to regain their outstanding power in the car market. Due to the leftward demand shift for Toyota cars, domestic cars, substitutes, will experience an increase in demand. Toyota is in an oligopoly because there are just a few large companies in the market. See http://www.whittierdailynews.com/news/ci_14330127. In the article they say ”As a result, Toyota lost an estimated 20,000 sales nationally through the weekend. And while January sales for other automakers increased 6 percent over 2009, Toyota's sales dropped 16 percent, though the recall was only announced at the end of the month.” Their saying that the profit losses for Toyota have already started and are very high. Another thing they say is "The one thing I'm banking on is the majority of our customers are baby boomers who've been buying Toyotas for years, they will continue to trust in us ... this recall is so rare and so isolated, it is totally overblown." It is believed, or I guess hoped that, people will return to buying Toyotas because they truly believe that this was a one-time deal and that this will never happen again. If this happens, the demand for Toyotas will slowly increase as time goes on.
ReplyDeleteKris Chatterjee
ReplyDeletehttp://news.yahoo.com/s/ap/20100121/ap_on_bi_ge/us_toyota_recall.
Toyota is “recalling 2.3 million vehicles in the U.S. to fix accelerator pedals that can become stuck”. If you haven’t noticed, that is a lot of cars, ranging from all different types of models in Toyota, as well as Lexus cars. This comes right after a previous 4.2 million car recall a month ago, due to the same accelerator pedal. The sudden acceleration in Toyota cars has killed 5 people, in a total 17 crashes. However, “Toyota is taking immediate action to address it”, taking in all reported vehicles for inspection and repair. Despite all their efforts, “the safety stumbles have dinged Toyota's reputation in the U.S. as a builder of dependable, high-quality cars”. This safety scare is obviously going to drive people away from purchasing Toyota cars, driving their demand down. All this repairing and extra parts is also raising input prices, and shifting supply to the left a little bit. Due to this, their quantity is drastically reduced, as well as a drop in price. Since Toyota is a direct substitute for other car companies, a drop in demand for Toyotas will result in increased demand for other car companies like Chevrolet, Ford, Nissan, etc…Toyota, being the leading car company in the world, will have its affect on the global auto industry. Demand will stay constant in the market because people will not stop buying cars, there are other companies to purchase from, but supply will drop a bit in the short run. Due to the small amount of firms that dominate the auto industry, and the significant barriers to entry, Toyota is part of an oligopoly. Since their demand and marginal revenue decreases and average costs of production increase, Toyotas profits will drastically decrease. This reliability breach is going to hurt the company and its revenue for a while, until they can build up trust with their consumers again.
Coming from a household that has had nothing but American made cars since the day I was born, with a father who refuses to buy a non-American made vehicle, I have been hearing a lot of I told you so comments from my father. But looking at this astonishing recall initiated by Toyota, its hard not to agree with him. This monster recall is really going to affect this reputation of being the best that Toyota holds for itself and there is nothing they can do at this point to stop these changes. I believe that this is going to really shift that demand for some Toyota vehicles but this bring drop in the demand will only last for a short time. Toyota will eventually fix all of these problems and almost undoubtedly attempt to make a point out of it in an attempt to get their sales back to where they were. For a little bit of time, this will be a great window of opportunity for some other automobile manufacturers to increase some of their sales with the Toyota powerhouse seems to be a little bit down in the dumps. Aside from decreasing their demand, this will also negatively affect their supply because less Americans will want their product, and they will be forced to focus most of their manpower on improving their current faulty products. For some, they may never be able to go back to a Toyota, such as this woman in Ridgewood in the article I picked, who said "I was thinking about a Highlander, but I won’t go near it now," she said. "Not with kids.” For some just that one mistake is enough to steer people away for good. “A study released last week by Kelly Blue Book showed 27 percent of the shoppers who said they were considering a Toyota prior to the recall now say they no longer are considering the brand for their next vehicle purchase”. This really exemplifies that decrease in demand for Toyota, which ultimately moves that demand for other automobiles to the right and knocks a powerhouse off of it’s pedestal, and gives the others a chance to take that place up top.
ReplyDeleteAfter all the safety malfunctions people will be scared to drive toyotas; shifting the demand for toyotas to the left. Other car company's will be in high demand because they are a substitute to Toyota. I'm not completely sure if Toyota will ever get the people's trust back. I know I don't trust them afer selling cars with faulty brakes and sticky gas pedals. In this article http://money.cnn.com/2010/02/15/autos/toyota_complaints_swell/ I chose this article because it supports my idea about how people are concerned about the dangers of driving a toyota, "NHTSA said that it has received nine new complaints alleging fatal crashes caused by sudden acceleration in Toyota cars since Jan. 27. The accidents occurred between 2005 and 2010 and involved 13 fatalities and 10 injuries, according to NHTSA." People don't want to drive cars that aren't safe. Toyota has a lot of problems to fix and it will take a lot to repair their damaged reputation
ReplyDeleteIt is quite obvious how bad this whole dilemma really is. It puts a panic on any Toyota owners and of course puts a major dent into Toyotas reputation and finances. This recall has now sacred people into not buying Toyotas which on a S/D graph would move the demand curve left; shifting the price down and the quantity down as well. On the other hand, for other car companies such as Ford and Chevrolet, the demand curve will shift right; increasing price and quantity. This is because people have no trust in Toyota anymore and have turned to other car producers. These shifts in the demand curve are only happening within the firms. For the entire car industry the S/D will remain unchanged. I used the article "Toyota fights for reputation as safety recall crisis widens" from http://www.guardian.co.uk/business/2010/jan/28/toyota-recall-widens-europe-china. This crisis has caused a scare in people because of the now new found lack of safety in the cars. People are now blaming "the Japanese motor manufacturer for compromising on quality control in an over-anxious bid to overtake American rivals as the biggest volume carmaker." If they had payed more attention to quality instead of just focusing on making money, maybe this would have never happened. Now this whole disaster has put Toyota in a hole. "Jim Ziegler, an industry consultant in Atlanta, said the Japanese firm was in increasingly difficult situation. He said: "Toyota's got the resources to bounce back from this, but this is the biggest crisis that they have ever faced and Ford and Hyundai are coming on strong." Being that Ford and Hyundai were two of the car companies that operated under Toyota's shadow, they now have the chance to get a whole lot stronger. The tables have turned for Toyota, who knows if they will be able to fully recover or not.
ReplyDeleteToyota, a huge automaker has really worried many citizens and brought about many complaints. People are now starting to get more concerned with the auto safety of Toyota than before. Recalls generally bring fear and doubt to the public, and the reputation of the company making the recalls undoubtedly is tainted. So, because of the tastes factor of TIRES, the demand will obviously decline and shift to the lift. However the demand of a dodge or Honda will rise because other competitors provide supplements to Toyota cars. This industry is an oligopoly because there are a group of big auto industries that control the market for cars. Very few small auto producers make it in the auto industry. The marginal revenue and demand will shift down because less people will buy cars from Toyota because of the decrease in demand in the market. Therefore there will be a price level and a quantity decrease and also the firm will not be producing at equilibrium, thus making less profit. Toyota may have only made a few recalls, but people are beginning to complain about the models that don’t even have any problems at all. People have been giving countless complaints that don’t really have much evidence. People, “whose relatives died in accidents with no discernable cause, but who now suspect sudden acceleration [of Toyota’s] played a role” are now trying to sue Toyota and also shooting complaints left and right, bringing down the reputation of Toyota itself. It does not matter to people, if Toyota has only recalled newer models or only one type of car they have produced. If they fear their safety, they’ll stop buying and therefore Toyota is going to have many problems trying to bring back it’s reputation in the auto industry.
ReplyDeletehttp://www.freep.com/article/20100215/BUSINESS01/100215041/1319/
Toyota’s recalls have caused many changes for the company and its competitors. The supply and demand graph for Toyota shows a shift to the left for the demand curve. This is due to consumers not wanting to buy a product that is not in proper condition. Joseph R. Perone’s article: Toyota recall could cause short- and long-term problems for automaker, shows how prices on used Toyotas are dropping. In his article it state that “Used-car prices of the small Toyota Matrix, for example, have dropped $800 since late January, according to Juan Flores, director of vehicle valuation for Kelley Blue Book. Toyota’s popular Camry sedan has fallen as much as $300, and the RAV4 is down $550, he said.” This quote shows how the demand for Toyotas has decreased by a great amount. This decrease is due to consumers not willing/ wanting to buy a car that is not in proper condition and they are not willing to take the chance.
ReplyDeleteThe firm graph for Toyota is a perfect competition graph. This is due to there being many competitors and they act independently. In this graph the mr is going to decrease because people are going to pay less for each car.
Although Toyota is struggling with these recalls, their competitors are gaining. The demand curve for Toyota’s competitors shows a shift to the right. This is due to more people wanting/ needing cars but not willing to buy a Toyota. Perone’s article also shows this. It states that “As Toyota wrestles with its problems, other car manufacturers are picking up market share. The Honda Civic and Accord, Chevrolet Malibu and Nissan Sentra all recorded increased new car transaction prices immediately after the Toyota recall, according to TrueCar.com, an automotive website that tracks industry sales”. So as Toyota is struggling other competitors are gaining from them.
Lastly changes that the auto industry is going to endure are unable to be determined. It is unknown whether the consumers that purchased Toyota’s now became consumers for another competitor or if they just decided to not buy a car and wait.
Things are not going well for Toyota. Having to recall all of those cars has cost them a lot of money, and they have lost the trust of many people. The auto market in general, I think will only be slightly affected by the recalls, because there are other companies that are substitutes for Toyota cars, but the demand for Toyota cars will go down, way down meaning the demand for other auto companies’ cars will go up. For example, the Toyota Prius was one of Toyota’s best selling cars until they were all recalled, so the demand went down for that car because not only were there none of these cars to buy, but nobody would want to buy them. Instead, people would want to go for other hybrid cars, like the Honda Civic Hybrid, the demand for that and other substitute cars will go up. Toyota is an oligopoly because it is very difficult to enter the auto industry.
ReplyDeleteIn the article http://www.wired.com/autopia/2008/11/gm-and-ford-may/, it talks about how Toyota’s recalls are affecting the entire auto industry, in both good and bad ways. “Everyone knows General Motors, Ford and Chrysler are in deep, deep trouble…... Toyota isn’t looking so great these days, either.” This quote shows that currently there isn’t really any division between auto companies, everyone’s on an even playing ground. Japanese cars are no longer considered better cars due to everyone being suspicious and fearing for their accelerators sticking. This next quote shows that every car company is affected by the auto market and the recent recalls. “In a way, Toyota is a victim of its own success. It has over the past 20 years transformed itself into one of the two biggest fish (the other being GM) in the pond. But now that pond has turned into a festering swamp of freaked out consumers and eerily quiet dealerships, and it’s not such a great place to be.”
http://www.nytimes.com/2010/01/22/business/22toyota.html
ReplyDeleteToyota messed up big time, they have provided customers with faulty gas pedals and because of this some people have died and some have just been left injured. they say it is a rare defect in cars but what they seem to forget is that when you are working in a perfectly competitive market, the customer is always right. they are recalling cars and have advised people that the floor mats are to blame, but even with them out people are dying, when you sell a product and not because of a human flaw but because of a flaw in the product people are dying really does make your reputation look bad. the demand has for toyotas most likely has decreased. many of their models have recalls, even from 2005, and you would think that if these problems occur 5 years before they decide to recall vehicles, this really makes them look bad because by now, they should have these bugs worked out in their vehicles. people have been buying less im sure of their vehicles after "another crash that killed four people" so their mr d ar and p have all decreased. this caused there to be a surplus of toyotas but this does not mean it is bad for the economy becuase for all we know, people could be taking their business else where, hopefully to an american made car. demand is shifing left, because im sure someone would rather buy a car from somebody else because they do not want to risk buying a car to double as a casket. toyota will most likely produce less as they should be busy fixing their mistakes for now, and hopefully will produce cars without defects and the demand will shift right and the market will correct itself, this event that has occurred has scarred toyotas reputation but hopefully in the near future people will trust toyota again.
Because I currently drive a Toyota Camry this article kind of scares me, and lessens my opinion on the company, even though I love my car and it is not one of the cars being recalled. I think because people will start to think about the safety of Toyota cars, it will just generally lessen the demand for these cars in the future. It will hurt them in the short run and I think even in the long run because of reputation. The demands for Toyota cars will shift way left. They will also be spending money on the recall which will also help lower the demand for these cars because they will probably go up in cost because of what the company is losing. And because of this it will help its competitors. Increase the demand for substitute goods (aka: ford, volts wagon, Honda), the demand will shift right. It will decrease their supply of cars while increasing other companies overall supply. I think Toyota is definitely a Perfect Competition, because there are so many other companies producing as good of cars, even though it is the biggest company, it isn’t much bigger than the others; so it’s not necessarily a monopoly.
ReplyDeleteI chose: “http://www.washingtonpost.com/wpdyn/content/article/2010/02/04/AR2010020401732.html” as my website because it showed that this recall would definitely is bad for the company even in the future. It also explains exactly what is wrong with the Toyota cars. When reporters asked if anyone would get hurt from defected cars that weren’t recalled a Japanese spokesmen said “That's not to say it won't happen, but I don't have any evidence of it." The article also said “When the news was reported moments later, shares of Toyota stock plunged 7 percent, erasing $3 billion of company value.” This recall obviously hurt the company and proves the image of the company was hurt and it may take years for them to rebuild their reputation. It will take them a while to return to equilibrium.
This recent Toyota recalls problem has jeopardized many Toyota consumers’ trust for this car company. It has been one of the best selling carmakers for a long time that this news has been very shocking for many people and lowered the reputation by a lot. This means that more people will be unwilling to buy cars from this company, lowering the demand line on its oligopoly firm graph. This will decrease the price and the units of output (profit). Now, these people will go out to buy cars from different car companies, increasing the demand for those substituting carmakers. Lucky for them, they will gain a little more profit. However, I believe that since Toyota had such a good reputation to being with, they will be able to regain this lost trust soon. According to the article “Toyota Dealers Nationwide Have Begun Fixing Accelerator Pedals On Recalled Vehicles”, they are determined to win back their customers’ trust. Chief Operating Officer says that “nothing is more important to us than the safety and reliability of the vehicles our customers drive, and we are determined to live up to the high standards people have come to expect from Toyota over the past 50 years”. Not only that, but they are also striving to fix the problem as soon as possible with “many of [their] dealers working extended hours – some 24/7– and adding service technicians and other staff to complete the recall campaign as conveniently as possible”. With such determination and commitment, I hope that Toyota will be back to the standards that they have worked so hard to establish over the years.
ReplyDeleteSource: http://pressroom.toyota.com/pr/tms/toyota/toyota-dealers-nationwide-have-153560.aspx
Having owned a Toyota since I was 21, and having one save my life in a freak rollover accident during icy conditions, I am not leaving the brand anytime soon.
ReplyDeleteHowever this recall does present some interesting problems for the auto company. Those of you who said the demand will shift left for Toyotas are absolutely correct, and a few of you eluded to the fact that the ATC will move up because of the costs associated with fixing the cars. In the end this will cost Toyota billions in the long run, but they have a loyal following and will survive.
Ok, time to put on my conspiracy theory hat for a second...this recall is getting way overhyped in the media at a time where GM and Chrysler are floundering (while Ford continues to gain strength). The US Department of Transportation has looked the other way for years and is just now coming down hard on Toyota (as they should have in the beginning), because of the attention the recall is getting. Here is my conspiracy theory though...the US auto market is struggling to get started again and I wonder if the press has overhyped this recall on a foreign competitor as a patriotic move to kick start the US auto industry again. Of course, my opinion is incredibly biased as I am a loyal Toyota customer...I'm just sayin...
Nice job this week class.
As a driver of a Toyota Corolla, I am honestly a little concerned about this. I am sure that other people are too and Toyota will definitely be hearing about it. The firm graph will definitely shift the ATC and MC line up. Because Toyota is such a large company, it will have severe consequences on the firm because it is an oligopoly. The demand for Toyota’s will decrease abundantly because the cars are not reliable. It is possible that the supply could also go down too. This could occur because they are going to have to make up for all of the money because of the problematic cars and making new cars. The company would not be selling as many cars and the price may go down, but for the most part would stay constant. Toyota’s competitors will definitely have huge increases in demand because people do not trust Toyota as much. The auto industry will suffer through a huge decrease in supply of cars because Toyota is one of its biggest producers. This would mean that the prices for other cars would definitely increase. Fortunately, other companies will produce more and sell more and hopefully the supply line will go back to where it was. The article I used to support my argument was from the Chicago Sun Times. It was published that the company “suspended U.S sales of eight models-including the Camry,” which is the most popular by far! This shows that people were not demanding it anymore and that the also had to decrease their supply. It is said that Toyota is “weighing up repairing the pedals or replacing them” which suggests that the demand will hopefully go back to normal if they do this. I hope that this problem is fixed because I know that for the most part, Toyota’s are very reliable.
ReplyDeletehttp://www.suntimes.com/business/2018631,toyota-recall-europe-012910.article
Tim Adornetto
ReplyDeletePrd. 7 Janczak
AP Economics
2/15/10
I think this recall will result in negative effects on the company regardless of the possible scenarios. This recall discourages consumers from buying Toyota cars because it shows the company’s flaws in front of a spotlight. “The issue goes beyond a simple repair. However, with the company now likely to see sales decline, [this situation] could lead to a loss of jobs both overseas and in Japan.” In the short-run, the supply line of cars will decrease because of this recall and the demand will also decrease because of the consumer’s lack of trust in Toyota. I think these malevolent effects will only be temporary though because this recall shows that Toyota offers the quality car while many other American companies create junk. One school of thought is that “while trust in a vehicle can take years to build, it can be damaged overnight. This has led GM to start a campaign to try to lure away potential Toyota customers”. In this scenario, long run demand will go down. Toyota has provided the highest quality of automobiles for a long time and even though their recent cars had faults, they are fixing them. I do not think people will lose trust in a company that makes a mistake and fixes it when there are many American companies who have major car problems and refuse to fix them. I think the opposite will occur. "If the public decides that the media outcry against Toyota is unwarranted, GM could suffer a public backlash instead, given that Toyota still commands a significantly loyal following among U.S. car buyers." In this scenario, there will be only a slight leftward demand shift in the graph because the majority of Toyota’s customers will not fade from the company because of something as small as a recall. I am personally planning to buy a Toyota when I get my car in the next couple of years and I know that this recall has absolutely no effect on my decision to stick with the company. I think Toyota has proven to all of the general public that it provides the most reliable and most durable cars on the market, just as it already has to me. I think this recall is easily forgivable. In the words of Hannah Montana, “Everybody makes mistakes, everybody has those days, everyone knows what I’m talking about, everybody gets that way.”
article quoted: http://www.tradingmarkets.com/news/stock-alert/tm_news-analysis-toyota-recall-to-have-global-effect-risk-company-s-public-perception-762836.html
I chose the article http://www.usatoday.com/money/autos/2010-01-21-toyota-recall-gas-pedal_N.htm which discusses why Toyota had its recalls, and what they plan to do about it. Demand for Toyotas will no doubt idly go down since the massive recall. But I think Toyota is too big of a company to get largely affected by this. Sure it will cost them a lot of money to bounce back, but in the long run they will return to how they were before the recall. Having never owned any type of car, I cannot make a stand on how I feel about Toyotas, but I know my family has always been a Ford family. My brother is in a college economics class and they also discussed this issue, but they brought up the point that possibly people will become more skeptical about buying foreign cars. I do not think this will stop people from buying foreign cars. Sure it will make an impact of their sales, but it will not completely ruin their auto industry.
ReplyDeleteBecause Toyota is in the car industry, we therefore already know that it is also in monopolistic competition with other car firms. Before the recent recall of millions of Toyotas, it was operating at equilibrium with the marginal cost equaling the marginal revenue. However, once the recall was issued due to defects in the breaking systems of the cars then the demand greatly decreased due to a fear of injury because of malfunctioning breaks. Additionally, the average total cost increased which only worsened the total losses that Toyota suffers from. This will result in a short term loss, but a particularly devastating one. Meanwhile, other car companies such as Ford have a sudden increase in demand due to car buyers trying to find dealers other than Toyota to buy from. This will increase their total revenue in the short run. Toyota will have to make up for lost revenue in order to attain equilibrium again. It won’t be impossible; it will just be difficult to do it quickly so General Motors can get their company back on track again.
ReplyDeletehttp://www.prnewswire.com/news-releases/worlds-first-predictive-sales-demand-indicator-says-toyota-demand-in-28-percent-freefall-83662562.html
I used an article about the general losses that Toyota is suffering from in order to back up my main arguments. The United Business Media states that “Toyota demand has declined 28 percent (seasonally adjusted) in the U.S. since Toyota announced sales suspension and a recall of many of its models. Autometrics says that practically all Toyota models have seen demand decline, not only the eight models subject to accelerator pedal issue.” This thoroughly proves that losses will incur due to the break issues that have been increasing over the past few weeks. And just like I mentioned, “Ford Motor Company has become a new beneficiary, with an increase in demand of 10 percent.” The Ford Motor Company will be able to sit back for the next month or so as they gain demand for doing nothing but producing cars that don’t have faulty brakes.
For my following analysis I made the following assumptions. Firstly, I consider the automobile industry as a Oligopoly due to the relatively small number of producers and an assumption that entry and exit costs would be high. Secondly, I consider the brake problems as a relatively isolated event that doesn’t reflect a trend in the quality of the Toyota brand overall. Thirdly, I assumed that this problem is minor enough to blow over in the coming months and will not tarnish the Toyota name permanently. Finally, I considered other brands as substituted to Toyota for obvious reasons (but if someone really wanted to get a Toyota and a Ford so they could choose what they wanted to drive to work every day then good for them and they can have fun with that and the hole in there wallet where money used to be). In the short run the sticky break problem will decrease the demand for Toyotas and will also increase the demand for substitutes such as GM cars and Fords. This should be true for both new and used Toyotas even if they are not effected by this problem. This should only effect Toyota in the short run for in the long run it will be forgot and eclipsed by a different story. The sticky Break scandal will also hurt other brands owned by Toyota, Lexus and Scion, even if they do not share the problem, but it is likely that they do for their cars share many parts and design characteristics with the cars of their parent company. In addition this scandal could jeopardize the Toyota Prius’s dominance in the hybrid market in the short run.
ReplyDelete