Toyota has tumbled from the top spot in a study that measures consumers' perceptions of brand quality, after the recall of 8.5 million of its vehicles worldwide.
Automotive Lease Guide, which sets leasing residual values for the auto industry, said Toyota plunged from No. 1 to No. 6 among mainstream brands in its semiannual Perceived Quality Study, scheduled to be released today, March 22.
On a scale of 100, Toyota's perceived-quality score dropped to 67.6 in the guide company's spring 2010 survey, down from 84 in fall 2009.
"It's the biggest drop by any auto company since the start of the survey" in spring 2008, said Matt Traylen, chief economist at Automotive Lease Guide.
Honda now holds the top spot, followed by Nissan, Ford trucks, Subaru and Volkswagen.
Toyota's upscale sibling, Lexus, dropped from first place among luxury brands last autumn to third place behind No. 1 Mercedes-Benz and No. 2 BMW.
Traylen said perceived quality starts with actual quality and is influenced by marketing; price strategy, including incentives; and inventory supply. Opinions of friends and family and high-profile incidents reported in the press also affect a brand's reputation for quality.
Perceived quality affects how much shoppers are willing to pay for a new or used vehicle, Traylen said. Declines in Toyota's perceived quality contributed to a 2 percent decline in the brand's 2010 residual-value forecast.
The report says retail demand for new Toyota vehicles has declined 5 to 7 percent, but wholesale demand for used vehicles has remained stable.
"When you look at who is buying at auctions, and that's the dealers, they still have a lot of confidence in Toyota," Traylen said.
He said he expects Toyota's incentive spending to remain high through June as the company responds to declines in retail demand, rebuilds brand image and clears excess inventory. But should the incentives persist beyond that, used-vehicle values will decline, shaving perhaps an additional 5 percent from Toyota's residual forecast.
Said Traylen: "Once you start relying on incentives, that will change peoples' opinion about the brand. After three to six months, it becomes a longer-term strategy."