Photo: IC

Large-scale product recalls may indicate embarrassing quality problems, but they also show a degree of honesty on the part of the manufacturer and willingness to deal with the problem.

There have been some big recalls in the auto industry recently, with 707,390 flawed vehicles recalled just in March this year, according to China's General Administration of Quality Supervision, Inspection and Quarantine, the country's top quality watchdog.

In March, BMW announced a recall of 120,246 of its cars in China owing to battery cable problems. Honda Motor Co will recall more than 24,000 CR-V vehicles in China starting from tomorrow, due to headlight wiring problems. Mazda Motor and its joint venture partners in China also began to recall more than 62,000 vehicles from April 1 to fix problems with anti-lock braking systems.

BMW has asked dealers to prepare auto parts and contact car owners for repair, said Yang Ming, a member of the PR staff with the company.

Li Xia, a member of the PR staff at Honda Motor China, told the Global Times that the company will offer free repairs.

But while foreign firms have been willing to admit to problems with their cars, recalls by Chinese firms are much less common, and analysts and consumers both feel the recall regulations launched on October 1, 2004 are not tough enough.

 

 

auto recalls

Good quality?

There are more than 10 domestic auto brands, including Chery, Jianghuai, BYD and Geely. But there have only been two major recalls since the regulations were launched in 2004.

On September 18, 2009, Zhejiang Geely Group started a recall of 2,175 units of its 1.8L Yuanjing JL7180 model, due to a fuel tube problem.

In September 2010, Anhui automaker Chery Automobile Co also recalled 3,200 vehicles due to design problems that could affect tire safety.

"We haven't done any recalls until now, but normally we will fix the problem for consumers when we get complaints," a member staff surnamed Yao at Anhui Jianghuai Automobile Co, told the Global Times.

However, there have been around 189 complaints over various problems with the autos produced by Jianghuai during the first quarter this year, according to 12365auto.com, a non-governmental auto quality information provider.

Chery Automobile also received 45 complaints related to gearboxes and exhaust pipes in the first three months this year.

"Just because domestic automakers rarely conduct recalls doesn't mean they are superior in quality and less prone to defects," Zhu Ming, manager of the market research department of auto consultancy LMC Automotive, told the Global Times.

The quality gap between domestic brands and foreign auto brands is still very big and has even widened compared to previous years, according to the 2011 China Initial Quality Study released last year by J.D. Power and Associates, a US auto market research company.

Li Ting, a 30-year-old woman in Wuhu, a city in East China's Anhui Province, has had her Chery car for almost four years. Li said she sent her car in for repairs five or six times a year. "There are always some small problems with the car, such as the car windows leaking, or the gearbox shaking. I haven't got any information related to recalls," Li said.

However, a Beijing resident surnamed Chen who has driven a joint-venture car for three years, told the Global Times that "Up to now I have only done regular maintenance to my car, and there has been no quality problem so far."

Why no recalls?

The regulations for recall of defective automobile products were intended to strengthen quality supervision. But Zhu from LMC said the policy is not comprehensive enough.

"In China, the most severe penalty for carmakers which violate the recall regulations is a mere 30,000 yuan ($4,770), which is a very light fine," Qiao Shengpu, general manager of the automotive division at Adfaith Management, told the Global Times.

Most domestic automakers don't have sound after-sales services to collect customers' feedback and solve problems together, Qiao said.

"Automakers are afraid that a recall might hurt the brand's reputation and they prefer to solve problems individually in private," Qiao remarked.

"A recall would increase the cost pressure for domestic automakers and might affect sales," Li Yuheng, an auto analyst with CIC Industry Research Center, told the Global Times.

Local governments also want to protect auto firms, as they are significant local industries that offer mass employment and can create a good brand image for the city.

One of Chery Automobile's four production bases is in Wuhu. "The local administrative institutions are only allowed to purchase Chery cars and the local government also gives subsidies to Chery every year to support the auto industry," a member of the Wuhu government staff who wished to remain anonymous told the Global Times.

Playing catch-up

Most Chinese customers in first-tier cities like Beijing and Shanghai prefer to purchase autos made by big brands, usually foreign ones or from joint ventures, according to Qiao from Adfaith.

"Domestic automakers still have the market in third- and fourth-tier cities as consumers there want cheaper cars. But it's hard to say if there will still be a market there in several years time," Qiao said.

Chinese customers regard "auto quality" as the most important factor when they choose a car, according to a research report released by J.D. Power and Associates this February.

Many domestic automakers have a strategy of lower prices in order to gain market share, but it is not a long-term strategy that can help them develop, said Mei Songlin, a senior analyst with J.D. Power.

The State Council released a draft of new regulations for auto recalls in China in February this year that would increase punishments for automakers that fail to recall defective vehicles, with the maximum penalty rising to 200,000 yuan from the previous 30,000 yuan.

"A complete recall system is needed for domestic auto companies. It would be beneficial for them, and bring them in line with the international level," said Li from CIC.

According to US government figures, 15.5 million vehicles were recalled in the US in 2011, a drop from the number of 20.1 million in 2010.

"Automakers will face a severe punishment if they hide the truth in the US, and the cost would be far more than from a recall," Qiao said.

Weak research and development ability and huge financial pressure are the major problems for domestic automakers, Li said. They also can't compete with foreign rivals in terms of brand building, publicity and financial support.

Some domestic automakers have chosen to cooperate with foreign companies in order to boost their development. Geely bought Volvo in 2010, and Chery said in March it has sealed a joint venture agreement with Jaguar Land Rover to manufacture and sell vehicles in China.

"Enhancing quality is the essential factor for the development of domestic automakers, and they need to cultivate safety awareness," said Qiao.