Cars and the consumer

Written by Dilip Bobb | Updated: Jul 21 2014, 03:22am hrs
Consumer attitudes are not the same the world over. That is especially true for consumers in the developed world and the rest of us in Asia. Western consumers have a deeper and long-standing association with brands and consumer rights as opposed to those in, say, India. Ralph Nader became an international star in the 60s because of his fight for the rights of American consumers, in particular, concerning car companies. There lies the rub. American car owners have been bombarded by car recall announcements in 2014. General Motors announced new recalls involving 2.7 million cars and trucks sold in the US. Toyota, one of the most trusted brands in the auto industry, has recalled almost 3 million vehicles so far this year. The numbers at Ford, Chrysler, Honda and Nissan range from almost 1 million to 1.6 million. BMW recalled 1,56,000 sports sedans and sport-utility vehicles in June to fix a problem that causes stalls. Mercedes-Benz called back 2,53,000 C-Class sedans to fix a faulty electrical connection that could shut off taillights and brake lights.

Heres the difference between American car owners and those in India. Ever since Toyotas largest-ever recall of vehicles in the US in 2009-2010, the company has been trying to recover its brand equity and rebuild consumer trust. Based on consumer attitudes towards the Toyota brand derived from GfK MRIs Starch Advertising Research Brand Disposition, prior to Toyotas recall in November 2009, over three-quarters (83%) of US adults surveyed were positive about the brand while fewer than 1 in 5 (17%) were negative. This showed that the majority of consumers had tremendous confidence in the Toyota brand. Then, in November 2009, Toyota recalled 3.8 million vehicles because of floor mats that trapped accelerator pedals. Consumer attitudes towards Toyota began to change. Positive brand disposition fell five points to 78% while negative brand disposition rose five points to 22%. In January 2010, after receiving customer complaints, Toyota recalled a million more vehicles for problems with accelerator pedals sticking in cars without floor mats. Then, from February through April 2010, Toyota recalled other car models for an array of problems. Following this, Starch data showed that consumers positive feelings towards the Toyota brand dropped even farther19 points to 59%. Consumers negative feelings rose 19 points to 41%.

Now contrast this with India, where car recalls have been on the rise and offer an insight into the behavioural patterns of Indian consumers. In the most recent instance, the countrys largest car maker, Maruti Suzuki India, recalled 42,481 units of its popular sedan, the Swift Dzire, to replace a faulty fuel tank component. This was the third time that the company recalled the Dzire. Earlier, Maruti Suzuki had recalled 581 units of the DZire in October 2013 and 4,505 units in April 2011. Sales of the Dzire have remained unaffected. The Dzire was the largest-selling sedan in the country in the last financial year. In fact, demand for the car increased 16.6% to 197,685 units in FY14 despite a prolonged slowdown in auto sales. This was also evident in the case of Ford and Honda. Ford recalled 972 units of the compact SUV EcoSport within two weeks of its launch in June 2013. The recall did not deter customers from purchasing the vehicle in large numbers. The EcoSport contributed as much as 53% to the companys sales in the domestic market last year. Similarly, Honda Cars India, which recalled 42,672 units of the City last year, has seen an overwhelming response for the sedan since it introduced the fourth-generation model in January this year. The new City has overtaken rival Hyundai Verna in sales in the segment.

Recalls have been a standard operating procedure in the West, but are a relatively recent phenomena in India. Last May, Honda Cars India recalled 31,226 units of its best-selling compact sedan Amaze and the Brio hatchback to inspect them for a possible defect in the brake system. The decision by Honda to recall the Amaze was partly based on the belief that the company didnt think its credibility would be affected. Such announcements do not affect the brand if we do these part replacements proactively. In fact, our past experience shows that our brand has further strengthened in our customers mind, said an HCIL spokesperson at the time. Brand experts say that a recall makes carmakers look more responsible and pro-active, considering India has a voluntary recall policy, unlike the advanced car markets where it is mandatory. Which explains why Dzire and City sales have risen despite the recalls. In advanced societies, recalls affect the credibility of the manufacturer. Till now, Indias voluntary recall policy has clearly inspired vehicle manufacturers to pro-actively recall vehicles. Only now is the government looking at a mandatory framework and compulsory safety features. To a large degree, the rise in the number of recalls can be found in a marketing model called The Rule of Six, which is related directly to consumers levels of emotional engagement, and thus loyalty, to a brand. It works like this: Brands that possess higher levels of engagement and loyalty before a crisis are six times more likely to be given the benefit of the doubt after some catastrophe transpires. Maruti, Ford and Honda were clearly doing something right to offset the wrong.

The writer is Group Editor, Special Projects & Features, The Indian Express