Volkswagen AG says it is recalling more than 384,000 vehicles in China to correct a problem with faulty gearboxes that can cause vehicles to lose power.
The announcement follows a recent report by Chinese state television that claimed the German automaker was selling cars with substandard gearbox systems, causing unspecified problems for some drivers. It also comes as VW is locked in a duel with General Motors for leadership in the world’s largest car market.
The recall could cost Europe’s largest carmaker more than $600 million, according to various industry estimates. While Volkswagen was unable to immediately comment on the costs, research firm LMC Automotive estimates replacements will cost between RMB 3,000, or $483, to RMB 10,000 per vehicle.
The recall, conducted by Volkswagen and its joint ventures, include the VW Golf, Magotan and Sagitar models, as well as the Audi A3, China’s quality inspector said on its website.
The move is a blow for Volkswagen, which counts China as its biggest market, selling more than 2.8 million vehicles there last year, giving it a 14% market share. China is critical to VW’s goal of becoming the world’s largest automaker by 2018.
The recall follows a report by the state broadcaster China Central Television featuring Volkswagen customers in China complaining about abnormal vibrations, loss of power and sudden acceleration in cars equipped with the company’s proprietary gearbox technology.
The broadcast was considered something of a landmark in the development of the Chinese auto industry and a major embarrassment for VW. But VW isn’t the only corporation that has felt the increasing wrath of consumers. There has been growing concern about product safety following a series of scandals over fake or tainted food, milk powder, medicines and other goods. Yum Brands, the parent of KFC and Taco Bell, experienced a 14% sales slump after reports surfaced raising questions about some of its suppliers.
In the case of Volkswagen, the maker said that in isolated cases problems with direct-shift gearboxes might cause a power interruption, but it insisted that drivers could remain in control of their vehicles and maneuver to a stop. Such a problem would routinely lead to a recall in the U.S. or Europe.
Over the years, VW has made a point of maintaining close relations with the Chinese government and working in tandem with the country’s plans for economic development across China. The German auto giant recently announced plans for a new factory in western China and with its Chinese partners is contemplating launching a new domestic marque to meet pressure from Chinese government to develop local brands unique to China.
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