How Automakers Are Affected By Recalls

by | Nov 13, 2017

How Car Recalls Affect Automakers

Let us cut to the chase: vehicle recalls are a nightmare scenario for consumers, never-mind the automakers, take the Takata recall for example. Apart from the fact that automakers face deep financial trouble in obliging to vehicle recalls, they face the greatest risk of disrepute. Trust is, indeed, the number one component that glues consumers to automakers, and once that trust in safety is lost we’re not so sure they will be able to regain it. So now, it pays to take a deeper look into the consequences of vehicle recalls from the automakers’ perspective. After all, it is not just the consumers who are burdened by vehicle recalls, since automakers are primarily responsible for them.

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Repair costs gnaw on the automakers’ revenue

Automakers are directly affected by way of growing repair costs as a result of vehicle recalls. For one, the fact that the flaws involved in vehicle recalls cannot be the fault of consumers means that automakers are primarily liable to address them. It does not matter whether suppliers or in-house personnel are the ones responsible for the root cause of recalls. Automakers, being the ones who employed those means for producing their cars, are obliged to shoulder repair costs, partly on account of suppliers’ involvement, or wholly. Consumers are in no way obliged to pay any amount to automakers for vehicle recalls, which are matters they have nothing to do with. Given that, it pays that all automakers are expectedly keen on the quality of their offerings, since shouldering repair costs can be financially-disastrous to them.

Legal costs count against automakers’ profit

Injuries or wrongful deaths, or even cases where a breach of trust leads to litigation, all translate to legal costs on the part of automakers. Needless to say, automakers are required to address the grievances of their consumers as they air them in the form of lawsuits, and should those produce an outcome favoring consumers, they are asked to shell out copious sums. That, of course, is financially detrimental to automakers, what with their given right to file countersuits and answer for settlements when the occasion arises. Legal battles in court are certain as a financially-costly consequence of vehicle recalls.

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Decreased automakers’ brand value

Apart from direct effects such as repair and legal costs, automakers suffer indirectly from vehicle recalls by way of their decreasing brand value. Automakers implicated in vehicle recalls become the subject of much disrepute, which in turn would alarm their current investors as prospective ones are turned off. That, of course, would lead to the flight of investor capital depending on the severity of vehicle recalls, since investors would not want to see their investments depleted. At the same time, automakers would have to spend much more on updated marketing campaigns in a bid to freshen up their image amid their implication in vehicle recalls. Note that such is of a trial-and-error nature, so the degree of success varies.

Plummeting sales due to automakers’ car recall percentage

Automakers would also dread the idea of being involved in vehicle recalls simply because they fear to lose their much-cherished trust with their consumers. Understandably, vehicle recalls cause disillusionment among consumers, who would very much prefer seeing their hard-earned money work in their favor. Although vehicle recalls do not oblige consumers to pay any fee related to repairs, they nonetheless have to deal with days driving substitute cars or commuting through some other way – something they would not anticipate after spending so much on the cars they bought.  So it is only expected that once automakers become involved in vehicle recalls, their sales would decrease with the waning trust consumers have towards them.

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There really is no way around vehicle recalls for automakers when they happen – they will certainly find themselves in the slumping end as they reel over the costs they have to pay. That is why several automakers try their very best to provide quality transportation to their consumers through producing solidly-built vehicles without as many issues as possible. Nonetheless, that does not mean automakers would lose out on a scenario where they are involved in vehicle recalls. in fact, an optimistic way of looking at things is to take vehicle recalls as an opportunity for affected automakers that they are responsible enough to satisfy the needs of their affected customers.

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