A scandal has sent shockwaves through Japan’s auto industry, with major players like Toyota (NYSE:TM) and Mazda (MZDAY) halting shipments and facing lost sales, leading to potential consumer backlash. Until the situation is corrected it could present an opportunity for other car companies to grab a spot in the passing lane. U.S. manufacturers General Motors (NYSE:GM) and Ford (NYSE:F) saw their stocks outperform both the overall market and Japanese rival companies after the announcement.
Manipulated Safety Test Data
The scandal centers around the discovery of manipulated safety test data submitted by several Japanese automakers during the vehicle certification process. Toyota, Mazda, Honda (NYSE:HMC), Suzuki (SZKMF), and Yamaha Motor (YAMCY) are all implicated, with investigations revealing incorrect fuel efficiency and emissions data, along with altered crash test results
Red Light on Shipments
Both Toyota and Mazda have been forced to halt shipments of certain vehicle models due to the irregularities. This suspension is in place while the Japanese transport ministry conducts on-site investigations and demands accountability from the automakers
U.S. Automakers Revved Up
With Japanese manufacturers facing these challenges, U.S. car companies stand to benefit. This is because increased demand for American-made vehicles could be fueled by the unavailability of popular Japanese cars or even consumer uncertainty surrounding Japanese brands. U.S. car companies can be expected to capitalize on this situation, potentially leading to a shift in market share dynamics.
While the impact and length of the halt on shipping are not known, each day represents an opportunity for a U.S. car company to sell more vehicles. However, the long-term consequences for Japanese automakers may only be negligible if the halt on shipping is short-lived.
Shareholders and Tokyo Are Concerned
The Japanese government is taking a tough stance, with the transport ministry playing a proactive role in investigations. The upcoming annual general meeting at Toyota is expected to be a platform for shareholders to voice concerns about the scandal’s impact on the company’s finances and reputation.
Investor Takeaway
The Japanese car manufacturers’ safety test scandal presents a unique opportunity for U.S. car companies to grab market share. Investors that have non-Japanese car manufacturers on their watch list may want to research and determine if the timing now is right to pull the trigger. Should it appear that Japan will quickly resolve the safety test issues, investors may check to see how beaten down popular Japanese car manufacturers have become, and whether they are likely to bounce back.
