A more restrictive vehicle warranty law that takes effect in China on Tuesday is unlikely to burden global automakers, but will likely raise costs for smaller local players.
The new “lemon law” gives Chinese consumers nearly as much protection as enjoyed by their counterparts in the United States to obtain free repair of faults or replacement of defective vehicles.
Big global manufacturers such as General Motors or Toyota are well-equipped to take the regulations, which are no more stringent than those they already face in their home or international markets, in their strides.
On the other hand, for some indigenous players, especially smaller, little-known carmakers with less rigorous quality control, the tougher requirements could sharply increase warranty-related costs.
“This will add pressure on many low-quality local brands in 2015 onwards,” said Jeff Chung, a Hong Kong-based analyst with Daiwa Securities. “I do not see this new regulation driving those smaller and weaker players into the ground in the next 12 months, but yes, they could be in trouble longer-term because industry consolidation is the ultimate goal for the central government.”
China has more than 70 registered automakers, most competing for just a thin sliver of the world’s biggest car market. Many are already feeling the pressure from slowing economy and tougher fuel economy requirements due to be implemented.
) - Tuesday, October 1st, 2013 - filed under Industry
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