Shares in the world’s largest carmaker got hammered, falling 6.5% in trading after subsidiary Hino Motors suspended the sale of certain trucks and buses equipped with the fraudulent engines.

Hino, in which Toyota owns over half the voting stock, fell 16% itself.

The discovery was made after Hino expanded an internal investigation into its North American operations to include those vehicles subject to Japan’s 2016 emission regulations and sold in its home market.

“Based on the findings to date, Hino believes that it failed to appropriately respond to internal pressures to achieve certain targets and meet schedules that were placed on Hino employees,” the truckmaker said in a statement on Friday, pledging to help affected customers.

Irregularities had already been flagged to U.S. regulators, prompting an investigation by the U.S. Department of Justice, with whom Hino said it is fully cooperating.

The truckmaker froze sales of its Ranger and Profia trucks as well as the coach bus S’elega, after discovering that either their diesel emissions or their fuel economy ratings had been tampered with by engineers.

Hino said it “deeply apologizes” and vowed to put legal compliance first from now on, adding management is taking the findings “extremely seriously.” 

In a separate statement, Toyota said 3,000 units of its Coaster bus, developed and manufactured by Hino since July 2019, had fuel efficiency ratings worse than advertised: “We would like to apologize for any inconvenience and concern this might cause customers who are currently using Toyota Coaster buses equipped with the engine in question.”

Reforms to compliance

Hino’s admission is reminiscent of the 2015 and 2016 diesel emissions scandal that ensnared several European passenger car brands, most notably Volkswagen and group sibling Audi. (Hino coincidentally maintains two joint ventures with VW Group’s listed commercial vehicles unit Traton, relating to procurement and the development of EV powertrain parts.)

Ironically, diesel trucks were known at the time to emit fewer harmful nitrogen oxides than those of cars in Europe, because the former all featured exhaust gas aftertreatment systems deemed too expensive by many mass-market carmakers. 

These systems break down emissions with the help of an ammonia-based solution called urea, but the catalytic conversion requires the use of some fuel in the process. 

The Hino trucks whose sale has been suspended in Japan either did not use these urea-based systems and therefore emitted too much NOx once they left the regulatory test bench for real-life road conditions, or they did but required more fuel to run than the manufacturer claimed. 

Average monthly sales of the three affected models amounted to nearly 1,880 vehicles, according to Hino. Altogether some 115,500 vehicles have already been sold to customers.

Going forward, Hino pledged to continue conducting a thorough investigation of its engine certification procedures and form a special committee consisting of independent outside experts that will propose corrective measures to their engine development processes.

“The committee will conduct an investigation to clarify the extent of the identified issues and an in-depth analysis into the root causes,” the Japanese truckmaker said. “In order to restore the confidence of all stakeholders, Hino commits to carefully reviewing the reports from the outside experts, taking effective remedial measures and reforming its corporate structure to put compliance first.”