The Japanese transport ministry’s inspection at Toyota’s headquarters is part of a widening investigation into certification irregularities that initially stemmed from a safety test scandal at Daihatsu, Toyota’s compact car subsidiary. The ministry’s probe has now ensnared several other prominent Japanese automakers, prompting industry-wide checks of certification practices.
In addition to Toyota, automakers Mazda, Honda, Suzuki, and Yamaha Motor have admitted to submitting flawed or manipulated data when applying for vehicle certification. Toyota, being Japan’s largest automaker, was the first to undergo the ministry’s on-site inspection, which was announced on Monday. The other four companies are also scheduled for inspections, according to ministry officials.
While some analysts predict that Toyota will face increased pressure to strengthen its governance processes, others believe the impact on sales is likely to be minimal. This is because Toyota has only suspended sales of three models, and many of its domestic competitors have also fallen short of the ministry’s certification standards.
Macquarie’s head of mobility research, James Hong, stated, “When it comes to actual sales in the Japanese market, the damage will be manageable or quite small because consumers basically have no alternatives in Japan.”
However, Hong noted that Toyota Chairman Akio Toyoda is likely to come under increased scrutiny. Proxy advisory firms Institutional Shareholder Services and Glass Lewis have recommended that shareholders vote against re-electing Toyoda at the upcoming annual general meeting. While his approval rating could decline further, he is not expected to lose his seat.
Both Toyota and Mazda have suspended sales of some models, but they maintain that there are no performance issues violating regulations, and customers do not need to stop using their cars. Toyota provided examples of wrongdoing, such as measuring collision damage on one side of a model’s hood instead of both sides as required and conducting tests under stricter conditions than those set by the ministry, but still failing to meet government requirements.
Safety test scandals have previously led to production stoppages at Toyota group companies, and the latest revelations could disrupt production at subcontractors and smaller companies in Japan’s vast automotive supply chain. Toshihiro Nagahama, executive chief economist at Dai-ichi Life Research Institute, warned that the impact cannot be ignored, as it could hurt Japan’s economic growth this quarter if subcontractors suffer disruptions and consumers become more hesitant to buy cars.
Shares of Toyota, Honda, and Mazda have lost almost 3% since Friday’s close, while Yamaha has fallen 1.3%, and Suzuki’s shares remain flat, reflecting the market’s reaction to the unfolding certification controversy.