Safety first for domestic car makers

• Source: Shanghai Daily
• [08:44 March 22 2010]
• Comments

Geely Holdings Group, Chery Automobile Co, BYD Automobile and other domestic manufacturers are eying exports as an avenue to higher profitability. Their aim is to sell cars in the US and Europe after tapping Eastern European and Southeast Asian markets.

However, most of these companies are young and are experiencing rapid growth even before they have the management systems in place to handle it. Many have failed to appreciate fully the higher safety standards required to sell cars in mature markets.

Brilliance's Zunchi sedan was given only a two-star rating in front-end crash tests in the Europe Union, triggering doubts about the auto maker's plans to sell its cars in the German market.

The Landwind sport utility vehicle made by Jiangling Auto, which aims to be the first Chinese vehicle to tap the EU market, also delayed its scheduled launch there because of poor results in crash tests undertaken by an independent German institution.

Compulsory recalls

The quality concerns highlight a lack of strong legislation in China regarding vehicle recalls and safety supervision systems.

"Most recalls at Chinese car makers are compulsory recalls," said Shao Feng, editor-in-chief of auto magazine That's Car.

"Car makers are very conservative about recalls on concern about the additional costs," he said. "As most Chinese car makers are young players seeking to win consumers' trust, they worry that recalls will damage their brand image." Most car makers in China prefer to deal with defects through after-sale service instead of recalls.

China adopted its first regulations on the recall of defective vehicles in 2004. There are reports that tougher laws on the recall of defective products, including vehicles, are under consideration.

Over the past five years, 212 recalls involving 3.2 million vehicles have occurred under the auspices of the General Administration of Quality Supervision, Inspection and Quarantine. Most of the vehicles were produced by joint ventures between domestic and global car makers, with few involving domestic companies alone.

Last year about 1.4 million defective vehicles were recalled, accounting for less than 2 percent of total vehicles in China. That means less than two vehicles were recalled for every 100 cars on the road, a ratio considerably lower than the 10 percent figure in the US.

Chinese consumers have complained that penalties for car makers with flawed vehicles are too lenient. The highest fine an auto manufacturer faces is 30,000 yuan ($4,398).

Car owners seeking compensation are usually confronted with imposing requirements to provide evidence and suffer endless red tape to file a claim. And if a Chinese-made vehicle is subject to a global recall, Chinese car owners normally receive a lot less compensation than equivalent owners overseas.

Technology upgrades

In recent years, Chinese car makers have been looking at overseas mergers and acquisitions to gain access to advanced technologies and lift vehicle quality.