The Chinese Government Gets Tough on Vehicle Recalls: New Regulations Issued

In an attempt to shore up quality standards within the auto industry, the Chinese government has released new federal regulations for vehicle recalls. Starting on January 1st of next year, automakers that fail to comply with vehicle recalls in a timely manner will be subjected to hefty fines of between 80,000 to 160,000 yuan (according to Automotive News China). While that might not be a huge fine compared to some of the more recent fines here in the States, the government also has the option of levying an additional fine of between one to ten percent of the total sales value of the vehicles that are being recalled.

So for instance, if there were a million Toyota Crowns recalled, and Toyota did not issue the vehicle recall in a timely manner (as determined by the Chinese government), and the approximate sales value (based on the amount that the vehicles were sold to independent dealerships) was 500 million yuan, then they would be subjected to not only the standard fine, but an additional fine of 5 to 50 million yuan. And that’s per vehicle.

Moreover, automakers could face the revocation of their production licences (meaning that they would no longer be able to produced vehicles locally) if it was determined that they intentionally concealed production defects, and/or refused to issue a “stop-sale” on the vehicles that are subject to being recalled. As it stands right now, all automakers producing and selling vehicles in China are operating in accordance with federal guidelines that were enacted back in 2005. Back then, the previous standards would only mandate that a minuscule fine of $1,600 and $4,800 be issued for failing to issue vehicle recalls. In all, between the years of 2004 to 2011, automakers recalled 6.2 million vehicles.

Look for the number of vehicle recalls to increase as more and more automakers look to take advantage of the ever-growing largest auto market in the world.

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