Record car sales on line as quality questioned

China is key to German carmakers' fortunes but there may be bumps in the road

PUBLISHED : Saturday, 20 April, 2013, 12:00am
UPDATED : Friday, 08 May, 2015, 4:27pm

Volkswagen, Daimler and BMW posted record sales for last year, fuelled by demand in China.

But this year, that growth is at risk as the government in Beijing steps up scrutiny of the carmakers and media outlets question their quality.

VW recalled 384,181 vehicles in China last month after state television featured complaints about vibration, loss of power and sudden acceleration in Golfs and other cars. China Central Television also reported that BMW, Audi and Mercedes owners experienced dizziness from asphalt in their vehicles.

"Of course we take the concerns in China very seriously and are investigating the matter," Joachim Schmidt, sales chief at Mercedes, said last week. He said he was surprised by the complaints.

"The components we use have been thoroughly tested before, and we use them in vehicles across the globe," Schmidt said. "You would assume that customers outside China might notice something similar."

The reports come as Chinese authorities have vowed to unmask producers of low-quality or dangerous goods. While domestic companies have not been spared scrutiny, foreign firms, such as McDonald's, Carrefour and Apple, are frequent targets.

China, the world's largest car market, is critical to German carmakers' ambitions of record deliveries this year, even as European sales contract for a sixth consecutive year.

The carmakers can expect to face questions about quality standards during media events this weekend at Shanghai's car show.

The Germans are mindful of what happened to Toyota Motor last year following tensions between China and Japan over disputed islands in the South China Sea.

After widespread media coverage of Chinese protesters demanding a boycott of Japanese goods, Toyota's deliveries in China fell 4.9 per cent last year.

China sales are forecast to grow to 37 per cent of Volkswagen's global vehicle volume in 2015 from 28 per cent in 2010, research firm LMC Automotive says. China is expected to account for 24 per cent of BMW's global car deliveries in 2015, double the level in 2010. Daimler's Mercedes-Benz unit will sell 20 per cent of its cars in China in 2015, up from 10 per cent in 2010.

Volkswagen's sales in China grew at a slower pace than the industry average last month, the month the CCTV report aired.

VW, which includes Hong Kong and Macau in its figures, reported that deliveries increased 11 per cent last month.

That compares with industrywide growth of 13 per cent, according to data from the China Association of Automobile Manufacturers.