Investors and Customers Are Remaining Loyal to Toyota

Despite the biggest product challenge and subsequent PR fiasco in Toyota’s history, it seems a bit surprising to find that investors and customers are staying loyal to the company.

No company has received more negative press since the beginning of the year than Toyota (TM: 76.47 +0.31%). Yet their stock price is down only 9% since the beginning of 2010. Major Dow components like Alcoa (AA: 10.76 +3.26%), AT&T (T: 29.95 +0.54%) and Verizon (VZ: 37.84 +0.75%) have all performed much worse during the same time period.

Toyota’s stock opened trading today at $76.72 which is still above the midpoint of their 52-week trading range of $56.79 - $91.97. How can a stock with as many challenges as Toyota is currently facing, not be trading at a 52-week low?

The answer is simply because investors believe in Toyota. Not only are they not even trading near their 52-week low, but the stock price appears to be stabilizing.

And its not just investors that are sticking by Toyota in this dark hour – their customers are as well. A recent poll by Consumer Reports found that an amazing 60% of current Toyota owners are likely to purchase another Toyota. While that number is down from 70% last year, it certainly reflects the high degree of loyalty that Toyota owners have.

February’s auto sales figures should also be considered a win for Toyota. Sure, sales were down 8.7% for the month, but that was really a very modest decline. Not to mention any names, but if other auto manufacturers were facing this great of a challenge there sales would likely be down 40-50% or more.

Toyota also still had 2 of the top 5 selling vehicles in February (Corolla and Camry).

Sure, Toyota’s brand has been tarnished over the events of the last few weeks. Last year, a study by Interbrand ranked Toyota as the 8^th most valuable brand in the world. Undoubtedly Toyota will see a drop in their ranking in 2010, but they still remain among the elite brands in the world.

Toyota’s competition also seems to be trying to help the struggling auto manufacturer.

3 weeks ago – Honda announced problems with their air-bag systems and is recalling 826,000 vehicles.

Yesterday – General Motors announced that they were recalling 1.3 million vehicles due to power-steering problems.

Today – Nissan is recalling 540,000 vehicles due to brake-pin and fuel-gauge problems.

In conclusion, while it is surprising that Toyota’s sales and stock price have held up so well during this crisis, it also is a reflection of the true power of the Toyota brand. Toyota is facing a serious near-term challenge, but the consensus seems to point to a strong recovery on the horizon.