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An Australian recall Wednesday by China’s two biggest car exporters for potential cancer-producing asbestos parts may threaten plans by Chinese automakers to expand into the U.S. and Europe amid intensifying competition at home.
Australia was to be the “testing area” for Chinese carmakers looking to enter larger markets and the recall has dealt a blow to those ambitions, according to Dunne & Co. Great Wall Motor Co. and Chery Automobile Co. recalled 23,000 of their vehicles sold in Australia after authorities found asbestos in some models.
“It’s a significant setback for the individual companies and development of the industry,” said Michael Dunne, head of industry researcher Dunne & Co. “Chinese car companies will continue to push overseas, but you can bet that other countries that they are moving into, or are exporting to, are going to take a closer look on what’s on offer.”
The use of asbestos in exports raises concerns about the quality and safety of products made in China, which has struggled with repeated health scares that include excessive lead found in toys, melamine-tainted milk and pet food killing children and dogs. Vehicle exports from the country may rise about 50% this year, extending record shipments in 2011, according to the official trade chamber.
Great Wall led shares of Chinese automakers lower in Hong KongWednesday as the discovery of asbestos – banned in 55 nations because of the fibre’s links to cancer and respiratory illnesses – undermines the nation’s carmakers in their push to build their brands in overseas markets.
Passenger-vehicle deliveries trailed analysts’ estimates for the first time in five months in July, according to data from the China Association of Automobile Manufacturers. Domestic brands have been the hardest hit in the market slowdown, facing higher levels of sales pressure than international brands, Westlake Village, Calif.-based researcher J.D. Power & Associates said.
Algeria, China’s second-biggest export market for cars in 2011, prohibits the use of asbestos for most uses, says the International Ban Asbestos Secretariat’s website. Chile, Uruguay and Egypt are others among China’s top 10 auto export markets last year that have similar bans.
Great Wall plans to double its number of overseas assembly plants to 24 by 2015 and raise total manufacturing capacity to 500,000 units a year, it said in April. The company plans to export 100,000 vehicles this year, or 18% of its expected total deliveries, chairman Wei Jianjun said in March.
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