Is BMW Caught In China’s Bad PR Crosshairs?

    BMW just announced a recall of its 5-series model suspiciously soon after government criticism of its environmental and pricing policies, prompting questions of whether the company is the newest recipient of a classic state-sponsored negative publicity campaign.
    Jing Daily
    Jing DailyAuthor
      Published   in Finance

    The BMW 5-series produced by the BMW Brilliance joint venture, which was recently recalled. (China Auto Web)

    After BMW was denied governmental permission to expand one of its joint-venture China factories last week, today’s news that it will be recalling 140,000 vehicles in the country appears quite suspect in its timing considering the government’s penchant for negative publicity campaigns against foreign companies.

    According to reports, the recall is associated with problems concerning the power steering systems on 5-series vehicles produced in China over the past four years under BMW’s joint venture with Chinese company Brilliance. Last week, China’s environmental ministry denied the joint venture permission to expand its annual production capacity from around 200,000 to 400,000 vehicles in a factory in Shenyang.

    China is certainly no stranger to negative publicity campaigns against foreign companies. The main purpose of the permit “denial” now appears to be public criticism of the company’s environmental standards, as BMW has responded by stating that the decision is simply an “opinion” and will not actually delay the project from going ahead as planned. Meanwhile, China’s state-run media outlet Xinhua also took a jab at imported foreign luxury vehicles last week, chastising BMW and other countries for reportedly inflating vehicle prices in China above those of other countries. This report was reminiscent of this year’s earlier state-run media campaign against Apple for allegedly giving customers in China unfair treatment, which was humorously botched when it was revealed that some opinion leaders on Chinese social media were paid by the government to criticize the company.

    However, the recent recall doesn't fit the bill as a typical highly publicized government takedown. BMW Brilliance voluntarily decided to issue the notice, which was “quietly posted on the website of the General Administration of Quality Supervision, Inspection and Quarantine,” according to Financial Times. In contrast, Volkswagen was the subject of a prominent CCTV investigation in March of this year, which prompted the automaker to recall over 380,000 vehicles over a problem with the car’s gearbox.

    According to experts cited in the article, this recall is unlikely to have a significantly negative effect on BMW:

    Analysts said the recall, due to water corrosion from a faulty seal, appeared less serious than that issued by Volkswagen in March. “In terms of financial impact it’s basically zero,” said Robin Zhu, automotive analyst at Bernstein Research. “In terms of brand damage it’s also negligible.”

    Reactions on Weibo to the news of the recall so far have been a mix of anger over yet another example of the product safety concerns that are so rampant in China and respect that the company was willing to come forward and take responsibility. “At least a large corporation like this is willing to put customers' safety first. I’ve never heard of a recall initiated by a local auto manufacturer, let alone a large-scale recall like this,” said @小姑凉的胖熊.

    Although the timing is certainly suspect, this latest issue could simply be one of genuine product safety concern—quality control issues with joint ventures are not unheard of, and it is generally assumed that car companies only go into joint ventures in order to avoid tariffs on imported vehicles. Joint ventures in China at the moment typically produce cars based on the foreign brand’s preexisting models, and quality comparisons between China-produced and imported cars have been called into question in the past.

    Jasmine Lu contributed to this report.

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