South Korea's Hyundai Motor Co announced a sharp rise in February sales, benefiting from recall woes at rival Toyota Motor Co, which planned aggressive incentives to win back U.S. customers.
Toyota's recalls totaling some 8.5 million vehicles globally due to uncontrolled acceleration and braking glitches have hurt its reputation for quality and shone a spotlight on vehicle safety issues.
In the latest of a string of product problems across the industry, General Motors Co said it was voluntarily recalling 1.3 million vehicles in North America to fix a power steering problem linked to 14 crashes and one injury.
Toyota is facing a slide in U.S. sales after recalling more than 6 million vehicles in that market alone.
U.S. February auto sales data, due later on Tuesday, are expected to show Toyota's market share sliding to its lowest level in more than five years, according to industry tracking firm Edmunds.com.
Hyundai, which has been enjoying a surge in popularity for its cheap and fuel efficient models, said its February sales jumped 23 percent from a year ago to nearly 250,995 vehicles, its eighth consecutive month of double-digit gains.
Under chief executive Chung Mong-koo, Hyundai has sought to cash in on the hit to Toyota's reputation, offering incentives for U.S. consumers to switch to its models such as the Sonata and Elantra.
The impact of Toyota's recalls started to emerge from January, with Hyundai Motor's rising market share. It seems to become even clearer in February, said Suh Sung-moon, an analyst at Korea Investment & Securities in Seoul.
GM RECALLS FOR STEERING
GM, the largest U.S. automaker, is also expected to have benefited from Toyota's recalls, but now faces its own albeit smaller problem.
With almost all major automakers involved in recalls, the whole issue is now about who admits problems first and go out to build trust with consumers, said Michael Sohn, analyst at Woori Investment & Securities in Seoul.
GM said the affected vehicles can be still be safely controlled but it may require greater steering effort under 15 mph.
The recall covers the 2005-2010 model year Chevrolet Cobalt and 2007-2010 Pontiac G5 in the United States; 2005-2006 Pontiac Pursuit sold in Canada, and the 2005-2006 Pontiac G4 sold in Mexico, GM said in a statement.
Toyota, which is facing an investigation for steering problems in its popular Corolla model, is not yet out of the woods on its recalls. The world's largest automaker said on Monday it will replace an oil hose in almost 1 million U.S. vehicles due to the risk of a leak that could damage the engine.
The fix includes late-year models of Camry, Avalon, Rav4, and Lexus 350 ES and 350 RX.
In an effort to regain U.S. market share, Toyota will offer zero-percent financing for 60 months on some 2010 model year vehicles, including its most popular Camry and Corolla sedans and other vehicles involved in safety recalls, a source briefed on the matter told Reuters on Monday.
Returning Toyota customers will also receive a complimentary two-year maintenance package, while cash rebates ranging from $500 to $3,000 will also be offered, said the source, who declined to be identified because the information has yet to be announced by Toyota.
Kazaka Securities analyst Yoshihiko Tabei the measures were a step in the right direction to avoid further damaging cuts in production.
Lower factory utilization rates would have a substantial negative impact on Toyota's earnings. It is crucial for Toyota to drive sales so it does not need to lower production levels.
US SALES HIT
Industry tracking firm Edmunds.com sees Toyota's market share dropping to 12.6 percent in February, its lowest level since July 2005 and compared to 17 percent for all of 2009, as Toyota cut sales and production of some its most popular models last month.
Shares in Toyota ended up 0.6 percent in Tokyo, having fallen more than a fifth since late January, when the recall crisis erupted. Some $30 billion in the company's market value has been wiped out since then.
Hyundai shares ended down 1.3 percent ahead of its sales data.
Toyota global quality control chief Shinichi Sasaki and North American President Yoshimi Inaba are scheduled to appear before a Senate committee on Tuesday -- a third hearing on Toyota's handling of consumer complaints about sudden acceleration.
In written testimony released before his appearance, Sasaki reiterated Toyota's plans to tackle quality and safety issues including working more closely with regulators, giving regions more autonomy on recalls and improving information sharing between regions.
President Akio Toyoda, who appeared before a Congressional panel last week, returned to Japan on Tuesday, having also travelled to China to apologize in person for the recall problems. (Additional reporting by Bernie Woodall in DETROIT; Kiyoshi Takenaka in TOKYO; Kim Miyoung and Shin Jieun in SEOUL and John Crawley in WASHINGTON; Writing by Lincoln Feast; Editing by Jean Yoon)