August 5, 2013 1:12 pm

BMW recalls 140,000 vehicles in China

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Security personnel walks inside a BMW factory in Shenyang

BMW has recalled more than 140,000 vehicles in China, less than a week after a planned expansion plan was criticised by the country’s environment ministry.

The German carmaker’s China joint venture, BMW Brilliance, said the recall was voluntary and stemmed from a fault affecting the steering systems of 5-series vehicles manufactured over the past four years.

“As soon as we found the defect we reported it to the government,” said BMW Brilliance, which operates a factory in the northeastern industrial centre of Shenyang. Last week, China’s environment ministry refused to sign off on the factory’s plans to double annual production capacity to 400,000 vehicles while also expanding an affiliated engine plant.

The ministry criticised BMW Brilliance for submitting an “insufficient” environmental report and failing to meet government pollution reduction targets. BMW said the ministry “opinion” was not final and would not delay the Rmb9.23bn ($1.5bn) project.

BMW’s sales in China, its biggest market, rose 15 per cent in the first half of the year to 183,000 units. BMW Brilliance accounted for more than half of this total.

Analysts said the recall, due to water corrosion from a faulty seal, appeared less serious than that issued by Volkswagen in March. “In terms of financial impact it’s basically zero,” said Robin Zhu, automotive analyst at Bernstein Research. “In terms of brand damage it’s also minor.”

Volkswagen recalled more than 380,000 vehicles in March after CCTV, China’s main state television channel, aired a report about a longstanding gearbox problem affecting the German carmaker’s cars. BMW’s notice, by contrast, was quietly posted on the website of the General Administration of Quality Supervision, Inspection and Quarantine.

CCTV’s report marked the beginning of an uncomfortable period of media and government scrutiny for major foreign multinationals operating across a range of sectors in China, affecting manufacturers of goods from baby formula to pharmaceuticals.

The stakes are particularly high for foreign carmakers given China’s status as the world’s largest car market.

In a corporate restructuring unveiled on August 2, General Motors hived off its China operations from its international division. Tim Lee, GM’s global manufacturing head, was appointed chairman of GM China.

On Monday the US carmaker, which operates joint venture factories with two of China’s largest domestic car companies, reported that its July China sales increased 11 per cent year on year to 221,580 vehicles.

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