Volkswagen Pressured to Recall Cars in China

Volkswagen will recall an estimated 384,181 cars in China, following a broadcast on the annual China Central Television (CCTV) consumer rights program. The show included a segment which noted problems with Volkswagen’s direct shift gearbox (DSG).

Volkswagen has already acknowledged the problem in 2012, and as part of their solution, the carmaker had already extended warranty for the part for 10 years. Although they admit that a recall is also part of their plans. After the broadcast, Volkswagen and the government regulators had a talk about the parts problem, and on Wednesday, the General Administration of Quality Supervision, listed the car models affected in the recall.

The cars were mostly from 2010 to 2012, and but also included some makes which were manufactured as early as 2008. Included in the recall were 21 car models and versions of Passat, Scirocco, Magotan, Bora, Sagitar, Octavia, Golf and Touran. It also included the imported Audi A3 models. Most of the models are locally manufactured in Volkswagen China’s plants.

Volkswagen is the number one foreign car manufacturer in China. It sold 2.81 million units in 2012, and it aims to increase sales to 4 million cars in the next five years. It had already announced that they were opening seven new car plants in China over the next few years.

The recall

The recall would start on April 2. Each piece of replacement part will cost Volkswagen from 3,000 to 10,000 yuan ($483 to $1,610). Industry analysts believe that the total cost to Volkswagen would be at least $600 million.

A faulty electronics in the DSG could lead to a loss of power. This would lead to unexpected slowing or acceleration. Although the danger is there, Volkswagen has also noted that no accidents have occurred and no injuries reported as a direct result of a gearbox problem.

State regulators said that the conclusions came about after exhaustive studies. They had interviewed more than 3,000 customers. They also mentioned that there have been more than 10,000 reports of these kinds of problems. This had lead to 12 spot checks and there were seven hearings with experts.

A law was passed in 2012, where cars can be recalled due to substandard quality parts which can have safety concerns. The state legislature also expanded the authority of state regulators to include food and drugs.

Not only Volkswagen

In a related development, regulators have also raised concern after asphalt was found inside China manufactured car models by Volkswagen, Audi, BMW and Mercedes Benz. Asphalt is used a s vibration dampening material. However, there have been reports of cars having a pungent smell leading to other symptoms like swollen fingers and dizziness.

Speculation is rife that the current round of strict implementation is part of the new head of government’s anti corruption thrust. China’s newly installed President Xi Jingping has promised he would go after corruption in China. He vowed to go after both big and small operators. The strict implementation of state regulators even after the Volkswagen’s agreement to extend warranties is a show of force. It might not be a game changer for the large foreign companies, but it does set new rules for doing business in China.