Problem may further dent firm's image, slow its expansion, analysts say
Volkswagen Group China (VW China) on Monday announced plans to recall 1,950 imported diesel cars in China as part of a global recall of 11 million diesel-powered cars amid an emissions scandal that has rocked the German carmaker.
VW is to recall 1,946 imported Tiguan SUVs and four Passat B6 sedans in China, the company said in a statement posted on its website on Monday.
The company said on September 26 that no vehicles produced by its joint ventures in China are involved in the incident.
VW may face fines of up to $18 billion in the US after having been found to have intentionally installed software in some of its diesel cars that allowed the vehicles to perform better on emissions tests, according to media reports.
The German automaker's global recall is expected to start in early 2016, media reports have said. No specific timetable for the China recall was provided.
China's quality and environmental authorities expressed concern about the issue on Monday. The General Administration of Quality Supervision, Inspection and Quarantine on Monday ordered VW China to carry out the recall as soon as possible to correct the problem.
The Ministry of Environmental Protection said Monday that it launched an investigation of the matter and will tighten inspection on emissions by imported cars.
The number of recalled cars in China may seem tiny compared with the global number, mainly due to the low popularity of diesel-powered passenger cars in China. But analysts are divided on how much impact the emissions incident will have on the company's performance in China.
"I don't think the incident will cause any major impact on VW's sales in China, as China has a very limited number of diesel-powered passenger cars on the road," Zeng Zhiling, a senior analyst at industry consultancy LMC Automotive, told the Global Times Monday.
But some others said that the scandal has tarnished the brand's image in China and will affect sales.
"The credibility of the VW brand in China has been put into question after a series of quality problems and its sales have already been affected," Feng Shiming, an analyst at Shanghai-based Menutor Consulting, told the Global Times Monday, saying that the emissions scandal will further dent its China sales.
The German automaker has already experienced negative headlines in China over the past two years. In October 2014, VW China recalled 560,000 of its Sagitar sedans to correct rear suspension malfunctions. In the recall, the carmaker proposed to place a metal plate in the trailing arm of the rear axle to ensure the proper operation in case of a rupture. However, some car owners said that solution was unsafe, and several groups of dissatisfied drivers launched protests after the recall.
In March 2013, problems in VW's direct shift gearbox (DSG) transmission technology were exposed by State-owned China Central Television (CCTV) during its annual program for World Consumer Rights Day. CCTV said that the problems could cause a sudden increase or loss of power during driving. After the report, VW launched a recall involving more than 380,000 cars.
China is the largest market for VW and contributes over one-third of its global sales. In 2014, the company sold more than 3.6 million vehicles in China, ranking No.1 among all carmakers. But road is about to get bumpy because of the huge financial burden imposed by the emissions scandal, Feng noted.
Besides a hefty fine in the US, VW may also face fines in the EU. And shareholders are entitled to seek compensation for losses caused by the scandal, Hao Junbo, a lawyer at Beijing-based Hao Law Firm, told the Global Times on Monday.
Analysts at UBS have estimated that total costs incurred by the scandal may reach 35 billion euros ($39.8 billion), media reports said.
The company had planned to enlarge its production capacity in China to 5 million units by 2018, but "the expansion plan is very likely to be slowed," Feng noted.
