Toyota Shares Stumble on Daihatsu’s Growing Safety Issues

Shares in Japanese car giant Toyota Motor Corp. declined on Thursday following safety issues in its small-car unit Daihatsu Motor Co. Ltd., which has prompted the company to hit the brakes on all its vehicle shipments.

Toyota’s stock fell 4.03% to ¥2,537.50 and was among the top underperformers on the Nikkei. The Aichi-based automaker was also the main contributor to the index’s weakness. The Nikkei last traded 1.62% lower.

Additionally, Toyota’s American Depositary Receipts (ADRs) dropped 2.20% overnight and was down 0.42% in the after-market.

Toyota provided no further details about the financial impact of the postponement, stating that it would examine certification operations and conduct a ‘fundamental reform’ to renew Daihatsu.

Daihatsu intends to halt all shipments until it receives regulatory approval, with Japanese officials now set to carry out a broader probe into the firm.

Daihatsu’s Safety Issues Grow More Dire

The slide in Toyota’s shares came after an independent panel found the extent of Daihatsu’s falsified safety checks to be larger than originally reported.

The investigation identified malpractice dating back to 1989, and the safety irregularities involved around 64 units manufactured by the small carmaker, with nearly two dozen of those models sold under Toyota’s brand.

The problem also impacted certain vehicles sold by Mazda Motor Corp. and Subaru Corp., considering Daihatsu, one of Japan’s biggest brands, builds a handful of cars for the two companies.

Mazda’s stock stumbled 4.10% to ¥1,532.50, while Subaru shed 3.47% to ¥2,563.00. Nissan Motor Co. Ltd. was trading in the red as well, losing 2.97% to ¥562.10.

Prior to the current revelation, Daihatsu stated in April that it produced fake safety reports on side-collision tests for more than 80,000 models, prompting a deeper investigation into the company.

The maker of smaller-sized automobiles and trucks represents about 7% of Toyota’s total sales, with the affected vehicles comprising sales mainly in Southeast Asia and South America.