Shares of Denway Motor dropped 5.37 per cent to HK$2.82 yesterday after its joint venture with Japanese carmaker Honda said it would recall more than 500,000 vehicles - about half its output over the past four years - due to potential power steering and oil pump problems.
The three models involved are the Accord, Odyssey and Fit made since 2003.
Guangzhou Honda, the joint venture set up between Guangzhou Automotive Industry Corp and Honda in 1992, had total sales of one million vehicles between 2003 and this year.
Honda's move represents the biggest vehicle recall in the mainland since the government launched vehicle recall regulations in October 2004.
'Compared with two years ago, whether the carmaker will launch a recall or not is not a big deal. After the government implemented the regulation in 2004, recalls have become the norm,' said US-based consultancy CSM Worldwide director Yale Zhang.
'This is a way to lift brand image and indicate to consumers the carmaker is a reliable one.'
Guangzhou Automobile aims to raise output to 1.1 million cars by 2010 from this year's 520,000 units, of which 360,000 will be Honda vehicles and 160,000 Toyota cars.
Last year, the carmaker sold 350,000 units.
A Denway source said the financial impact would be minimal as the company only needed to bear some administration expenses. Other recall costs would be borne by the car-parts suppliers.
'It would be impossible to predict the exact number of cars which would actually be brought in for repair,' said DBS Vickers analyst Vincent Ha.
'But this is a way to enhance corporate and brand images as Honda used to be low profile in exposing its business in China before.'