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Recalls are no longer taboo for carmakers

Indian firms recall more than 11% of cars sold in the year to June; analysts say industry may be ‘coming of age’
Amrit Raj Mail MeTwitter
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First Published: Tue, Jul 23 2013. 12 20 AM IST
Auto companies have recalled about 210,294 cars, or about 11.43%, of the 1.8 million cars sold in the 12 months to June, according to data provided by the SIAM industry lobby group. Photo: Ramesh Pathania/Mint
Auto companies have recalled about 210,294 cars, or about 11.43%, of the 1.8 million cars sold in the 12 months to June, according to data provided by the SIAM industry lobby group. Photo: Ramesh Pathania/Mint
Updated: Tue, Jul 23 2013. 07 14 PM IST
New Delhi: Indian carmakers are becoming proactive about recalls, suggesting that a voluntary code put in place by the industry last year is working and that they’ve been able to overcome the stigma attached to such exercises in a climate in which companies are struggling to revive sales, analysts said.
Auto companies have recalled about 210,294 cars, or about 11.43%, of the 1.8 million cars sold in the 12 months to June, according to data provided by the Society of Indian Automobiles (Siam), an industry lobby group.
While there was no penalty clause in the Voluntary Recall Code announced on 2 July last year, Siam had recommended that the government take action if members failed to recall vehicles when it was required, Mint reported at the time.
In the year to June, as many as 11,506 two-wheelers were recalled.
There have been at least two recalls this month. On 11 July, Ford India Pvt. Ltd asked owners of 972 diesel-powered EcoSport mini-sports utility vehicles to bring them to their service centres. On 20 July, India Yamaha Motor Pvt. Ltd recalled 56,082 units of its Ray scooter.
The seven recalls in the year to June cover nine car models.
Unlike developed markets such as Europe, Japan or the US, India still has no official recall policy. Typically, an auto maker in India makes an announcement offering to fix any defects and replace faulty components, but escapes penalties and punishments common in developed markets.
In the US, which is the world’s largest auto market, a company could be fined as much as $32.4 million by the government for failing to recall vehicles due to faulty parts. In India, the government is in the process of forming the National Automotive Board, which will oversee issues such as safer transport, performance and research & development.
The spate of recalls are “the signs of the industry coming of the age”, said Anil Sharma, senior analyst at consultant IHS Automotive.
“There was a stigma attached to this whole concept that such a process will damage the brand. I think with companies getting proactive, that notion is dying,” Sharma said.
In October 2010, Tata Motors Ltd offered a free fix on more than 70,000 units of the Nano, following several instances of the car catching fire, but refrained from using the word “recall”.
Ford India had no hesitation in using the term. Its recall of the EcoSport came less than a month after the much-awaited compact SUV was launched on 26 June.
Last week, Ford India said it had received 30,000 bookings for the EcoSport, translating into a waiting list of up to 6 months for the most popular variant. The recall had to do with changing the location of the glow plug, which heats up the fuel before the engine starts.
While the industry has become more open about the concept, customers understand that it stands for an improvement in the way companies respond to problems, said Vishnu Mathur, director general, Siam.
“You have recall figures in front of you and you have sales numbers as well. Had there been an impact on the brand, it would have been visible on the sales. Clearly, Indian customers are welcoming this move,” he added.
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Car sales in India declined 6.69% in the last fiscal on account of a prolonged slowdown in the market and other macro-economic factors such as high interest rates and rising fuel prices.
While market leaders such as Maruti Suzuki India Ltd, Hyundai Motor India Ltd and Indian-owned manufacturers such as Tata Motors  are yet to recall any of their models under the code, firms such as Toyota Kirloskar Motor Pvt. Ltd, Ford, Honda Cars India Ltd, Renault India Pvt. Ltd and Nissan Motor India Pvt. Ltd have been proactive.
Amid rising competition and slowing car sales, car makers are becoming more customer-friendly, said Pravin Shah, chief executive (automotive), Mahindra and Mahindra Ltd (M&M).
The recall code is raising the number of such actions, he said.
“This is something which is an established process across the world and is developing as a good practice in our industry,” Shah said. “Normally, over 5,000 components go into a vehicle and mistakes are bound to happen at every level. So you can’t do away with it. One needs to understand that customers are stakeholders at large.”
In a first for Mahindra, the firm had replaced three parts—fluid hose, front power window units and left wiper blade cover—in a select batch of XUV 500s manufactured during 2011-2012, it had said in a statement on 8 March. M&M did not disclose the number of vehicles that needed changes. It didn’t use the term recall, calling it a “preventive replacement of some parts”.
“We have not noticed any impact on our brand or sales due to this,” Shah said.
Despite the seeming acceptance of the recall process by the industry and customers, Sharma of IHS Automotive said that a penalty clause was needed in the recall code.
“With the National Highway Traffic Safety Administration (NHTSA) in the US raising the penalties multi-fold, the companies take these norms very seriously. While a need for such clause has not come up in India, it is unfortunate not to have such a regulation in a market as big as India,” Sharma said.
The NHTSA keeps track of problems in the auto industry and if there is a growing number of complaints against a car maker, it can investigate and ask the company for a recall or penalize it.
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First Published: Tue, Jul 23 2013. 12 20 AM IST
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