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Li Baoquan, a Beijing citizen, envies car owners in the United States because their vehicles can be recalled upon discovery of a defect. Chinese consumers are not so fortunate.
Li says his new Chery car has sprung an oil leak. He went to the car dealer and discovered similar claims by many other car owners. The dealer can offer free repairs within the warranty period, but beyond that car owners have to pay out of pocket. In the United States, a faulty model would be recalled no matter what.
Luckily, Li’s car is under warranty, but he still worries about other possible defects. The Management Regulations on Recalling Faulty Vehicles will be implemented on January 1, 2013, much to Li’s relief.
“Eventually, China will have the same laws regarding car recalls as in the United States, and this is undoubtedly good news for consumers,” he said.
Jia Xinguang, a senior independent analyst on the automobile industry, says that despite China’s status as the world’s biggest car market, the country is lacking adequate laws when it comes to recalling faulty vehicles. After eight years of effort, car recall has become national law, a reflection of the government’s attitude toward bettering the auto market.
Improving the market
Car recalls are not new in the United States, which created the world’s earliest recall system. Car recalls are in place in Europe, Japan, South Korea and other countries.
The auto industry in China saw rapid development after 2001 when China entered the World Trade Organization. Since car recall was an internal government provision formulated in 2004, it had no compulsory legal backing powerful enough as national laws and regulations do.
As China has become the world’s biggest car consumer and as the domestic auto market matures, those with their eyes on purchasing a car are becoming more concerned about quality and safety.
Because of an absence of related laws and regulations, automakers often evade consumers’ claims. International automakers such as Toyota and Honda even exclude the Chinese market when recalling some faulty models in other countries.
Compared with the U.S. car market, China has far fewer recalls. As incomes rise and more Chinese buy vehicles, the government has been under pressure to improve related laws and regulations.
According to the new regulation, if there is a defect that may compromise safety, the production, sale and importing of such vehicles should be suspended and the producer must initiate a recall. Producers are subject to a fine of 2-10 percent of all vehicle sales should a recall not be issued.
Qiu Baochang, head of the lawyers for the China Consumers’ Association, says that a fine of 10 percent of the total value of the faulty products could spur automakers to issue more recalls.
Jia thinks that the new regulation is good news for the “guaranteed repair, replacement and return” of cars and enhances the government’s ability to investigate faulty products.
Adapting to recall system
Due to size discrepancies in its fuel tanks, Zhejiang-based automaker Geely recently ordered a nationwide recall of 55,018 MK and MK2 vehicles manufactured between January 1, 2009 and November 30, 2011.
This is the seventh time domestic brands have had to recall products in the past three years, far fewer than the 170 recalls by joint venture manufacturers and foreign brands.
Cui Dongshu, Deputy Secretary General of the China Passenger Car Association, says the reason there are fewer recalls by domestic brands is that local manufacturers worry about damaging their reputation.
With smaller sales volume than those of joint ventures and imported cars, domestic manufacturers were unlikely to order a recall. The new regulation forces domestic manufacturers to consider the possibility of massive penalties should they fail to issue a recall. Cui predicted that the number of domestic brand recalls will substantially increase.
The new regulation will promote the development of domestic brands, which are likely to enhance the quality of their management and their brand image, said Cui, thereby strengthening consumer confidence.
Zhu Huarong, Vice President of Chang’an Automobile (Group) Co. Ltd. based in Chongqing, said that domestic brands will face increasing pressure to recall products.“We have fallen far behind international brands in engineering development, quality control and suppliers’ parts and components,”he said.
Supervision is key
Jia said it is hard to predict how much effect the new regulations will have on the auto market, but he stressed that the challenge is to ensure the regulations are followed.
In 2004, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the National Development and Reform Commission, the Ministry of Commerce and the General Administration of Customs jointly created the Management Rules of Automobile Faulty Products, but it has little legal punch.
It imposes a maximum total fine of 30,000 yuan ($4,754), regardless of how many cars are affected and how much they cost, and the responsibilities and obligations of the manufacturers are not clearly defined.
The new regulation now strengthens punishment, including the maximum 10-percent fine.
“Although punishment is increased and there are laws to go by, it doesn’t mean the regulation will be strictly enforced,” Jia said.
According to the regulation, relevant government departments can launch an investigation upon discovery of an auto defect.
“But it doesn’t say how the department in charge can come across the information. Therefore, the government should also establish a third-party supervisory body that can receive consumer claims and create a database for sharing quality information, safety technology and analysis of road accidents,”Jia said.
Jia added that the government should give consumers more power when they encounter an auto defect. Consumers should also have the right to apply for a recall through the government and have the right to be informed of any recall results, he said.
Dong Lequn, Deputy Director of the Department of Law Enforcement at the AQSIQ, said automakers should strengthen their after-sales services and be more responsible to the consumers.
According to Dong, automakers should collect information on faulty products in a timely manner, take customer claims seriously and provide timely information of the vehicles’ quality and safety. Upon detecting a defect, an investigation should be immediately launched and a report sent to the supervising authority.
Still, many domestic manufacturers aren’t prepared to do any of the above, said Dong. Therefore, a thorough and swift recall investigation remains elusive.
Li says his new Chery car has sprung an oil leak. He went to the car dealer and discovered similar claims by many other car owners. The dealer can offer free repairs within the warranty period, but beyond that car owners have to pay out of pocket. In the United States, a faulty model would be recalled no matter what.
Luckily, Li’s car is under warranty, but he still worries about other possible defects. The Management Regulations on Recalling Faulty Vehicles will be implemented on January 1, 2013, much to Li’s relief.
“Eventually, China will have the same laws regarding car recalls as in the United States, and this is undoubtedly good news for consumers,” he said.
Jia Xinguang, a senior independent analyst on the automobile industry, says that despite China’s status as the world’s biggest car market, the country is lacking adequate laws when it comes to recalling faulty vehicles. After eight years of effort, car recall has become national law, a reflection of the government’s attitude toward bettering the auto market.
Improving the market
Car recalls are not new in the United States, which created the world’s earliest recall system. Car recalls are in place in Europe, Japan, South Korea and other countries.
The auto industry in China saw rapid development after 2001 when China entered the World Trade Organization. Since car recall was an internal government provision formulated in 2004, it had no compulsory legal backing powerful enough as national laws and regulations do.
As China has become the world’s biggest car consumer and as the domestic auto market matures, those with their eyes on purchasing a car are becoming more concerned about quality and safety.
Because of an absence of related laws and regulations, automakers often evade consumers’ claims. International automakers such as Toyota and Honda even exclude the Chinese market when recalling some faulty models in other countries.
Compared with the U.S. car market, China has far fewer recalls. As incomes rise and more Chinese buy vehicles, the government has been under pressure to improve related laws and regulations.
According to the new regulation, if there is a defect that may compromise safety, the production, sale and importing of such vehicles should be suspended and the producer must initiate a recall. Producers are subject to a fine of 2-10 percent of all vehicle sales should a recall not be issued.
Qiu Baochang, head of the lawyers for the China Consumers’ Association, says that a fine of 10 percent of the total value of the faulty products could spur automakers to issue more recalls.
Jia thinks that the new regulation is good news for the “guaranteed repair, replacement and return” of cars and enhances the government’s ability to investigate faulty products.
Adapting to recall system
Due to size discrepancies in its fuel tanks, Zhejiang-based automaker Geely recently ordered a nationwide recall of 55,018 MK and MK2 vehicles manufactured between January 1, 2009 and November 30, 2011.
This is the seventh time domestic brands have had to recall products in the past three years, far fewer than the 170 recalls by joint venture manufacturers and foreign brands.
Cui Dongshu, Deputy Secretary General of the China Passenger Car Association, says the reason there are fewer recalls by domestic brands is that local manufacturers worry about damaging their reputation.
With smaller sales volume than those of joint ventures and imported cars, domestic manufacturers were unlikely to order a recall. The new regulation forces domestic manufacturers to consider the possibility of massive penalties should they fail to issue a recall. Cui predicted that the number of domestic brand recalls will substantially increase.
The new regulation will promote the development of domestic brands, which are likely to enhance the quality of their management and their brand image, said Cui, thereby strengthening consumer confidence.
Zhu Huarong, Vice President of Chang’an Automobile (Group) Co. Ltd. based in Chongqing, said that domestic brands will face increasing pressure to recall products.“We have fallen far behind international brands in engineering development, quality control and suppliers’ parts and components,”he said.
Supervision is key
Jia said it is hard to predict how much effect the new regulations will have on the auto market, but he stressed that the challenge is to ensure the regulations are followed.
In 2004, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the National Development and Reform Commission, the Ministry of Commerce and the General Administration of Customs jointly created the Management Rules of Automobile Faulty Products, but it has little legal punch.
It imposes a maximum total fine of 30,000 yuan ($4,754), regardless of how many cars are affected and how much they cost, and the responsibilities and obligations of the manufacturers are not clearly defined.
The new regulation now strengthens punishment, including the maximum 10-percent fine.
“Although punishment is increased and there are laws to go by, it doesn’t mean the regulation will be strictly enforced,” Jia said.
According to the regulation, relevant government departments can launch an investigation upon discovery of an auto defect.
“But it doesn’t say how the department in charge can come across the information. Therefore, the government should also establish a third-party supervisory body that can receive consumer claims and create a database for sharing quality information, safety technology and analysis of road accidents,”Jia said.
Jia added that the government should give consumers more power when they encounter an auto defect. Consumers should also have the right to apply for a recall through the government and have the right to be informed of any recall results, he said.
Dong Lequn, Deputy Director of the Department of Law Enforcement at the AQSIQ, said automakers should strengthen their after-sales services and be more responsible to the consumers.
According to Dong, automakers should collect information on faulty products in a timely manner, take customer claims seriously and provide timely information of the vehicles’ quality and safety. Upon detecting a defect, an investigation should be immediately launched and a report sent to the supervising authority.
Still, many domestic manufacturers aren’t prepared to do any of the above, said Dong. Therefore, a thorough and swift recall investigation remains elusive.