Two top-notch Chinese car companies are recalling 23,000 vehicles from Australia due to the presence of asbestos in the engines and exhaust gaskets—this, after explicitly stating that the cars would not contain the cancer-causing chemical.As Michael Dunne reports in the WSJ, this this may be an example of a “quality fade”: Prospective buyers initially receive impressive samples of goods, and shoddier ones well after the contract is signed (the company itself claims that the shipment of flawed cars was accidental, but few are buying this explanation).Domestic economic pressures within China may explain why normally trustworthy companies are looking for ways to corners:
Chinese independent car companies like Chery and Great Wall are under pressure in the home market. Since 2010, they have been losing market share to the more powerful joint-venture companies. This places enormous financial pressure on the companies — the kind of strain that could lead people act a little less carefully, or even shoot themselves in the foot by shipping asbestos-laden engine gaskets to Australia.Chinese automakers saw Austrialia as a small but strategic test market where they could prove their worth and win over some of the world’s more discerning customers. Entry into America, Europe and Japan was supposed follow soon. But this untimely blunder shifts Chery, Great Wall and the reputation of China’s auto industry backwards onto precarious ground.
The fact that even internationally respected Chinese companies are now reneging on promises says something important about the present and future state of Chinese industry. While these companies loose their foothold, automation technology and rising costs in China have also made foreign companies seriously consider ‘reshoring’ back to North America. Even something as apparently small as a compromised car part can be an unwelcome sign of China’s economic slowdown.