1. Total recall

Total recall

Leading car manufacturers from Maruti to Audi, Nissan and Hyundai have recalled models of their vehicles to replace faulty components. Is it seen in a negative or positive light by consumers? How do the manufacturers view the trend?

By: | Published: November 9, 2014 12:21 AM

Last week, Audi issued a recall of 6,758 units of the A4 sedan in India to upgrade a software in the airbag control unit. A few days before that, the German luxury car maker recalled 382 units of its premium SUV Q7 to replace a faulty vacuum line in the brake system.
Towards the end of October, Honda, the Japanese major, recalled 2,338 units of its Brio hatchback, Amaze sedan and SUV CR-V to replace a faulty part in the airbags.

A few days before that, Nissan, another Japanese major, recalled about 9,000 units of the India-made Micra hatchback and Sunny sedan, again to replace defective airbag parts.

Early October saw a big recall news, with car market leader Maruti Suzuki recalling 69,555 Swift Dzire sedans, and Swift and Ritz hatchbacks to repair wiring harness fitment. In fact, in April this year, in one of the biggest vehicle recalls in India, Maruti had recalled over a lakh units of Ertiga, Swift and Dzire to replace faulty fuel filler neck.

Hyundai India, too, recalled 2,437 units of its SUV Santa Fe to replace a faulty stop-lamp switch in May this year.

Clearly, car companies have been proactive in recalling vehicles, especially in cases of safety issues, ever since the Society of Indian Automobile Manufacturers (SIAM) initiated a voluntary recall policy in 2012. In fact, over seven lakh vehicles have been recalled by various manufacturers since then.

The recall news, understandably, has shifted from the international pages of our newspapers to the front pages.

That leads us to the question—is a recall now seen as a progressive step by the manufacturer? Rajeev Singh, partner and head, automobile sector, KPMG India, agrees. “With maturity of technology and markets, increasing complexity in vehicles and the rapid rate of new product introduction, product recalls are here to stay. The word ‘recall’ is largely synonymous with ‘technical problem’ or ‘manufacturing defect’ and hence is likely to have an initial negative perception in the minds of consumers. For changing the perception of consumers and gaining their confidence, a recall can be positioned as a proactive step by manufacturers in fixing the issue before it escalates into a major problem. This may gain trust with consumers in India, who earlier didn’t bother much for recalls related to manufacturing defects,” he says. In fact, developed markets such as the US and Europe have legislations in place, which govern recall policies. “India, being in the top 10 markets in the world for the automotive industry, lacks legislation that can cause an implication to a car manufacturer in case of a voluntary recall,” Singh adds.
RS Kalsi, the new executive director of marketing and sales, Maruti Suzuki India, too, feels a recall is now a forward-looking measure. “India does not have a recall regulation yet. Recall is voluntary. Our experience is that customers take a positive view of such proactive initiatives by the company. I see other global auto companies also following this practice in India, which is good for the customer.”

Hyundai India senior vice-president Rakesh Srivastava is of the view that a recall reflects transparency in the automotive business. “In a fast-growing market such as India, recall policy improves confidence of all the stakeholders,” he says. “A car has almost 10,000 parts, supplied by various vendors. We have processes to check the quality at different levels, and identify and solve a problem in the initial stages itself. However, at times, some slight problems are discovered at a later stage. Thus, a recall shows the strength of the manufacturer to identify and solve any such issues,” Srivastava adds.

Officials at General Motors—which last year recalled 1.14 lakh units of Chevrolet Tavera and later 4,000 units of the Chevrolet Sail small car—too believe recalls are no more a taboo in India. P Balendran, vice-president, General Motors India, says, “Customers today understand the meaning of a recall; the manufacturer is dedicated towards replacing a component free of cost for ensuring the best performance and quality of the vehicle.”

But what if a recall happens too often?
Singh of KPMG believes the credibility of the manufacturer might be questioned in a recall, depending on several factors such as the intensity or severity of the problem, time taken for recalling and fixing the issue, and the communication by company and dealers. “Recalls may bring in a sense of responsibility in manufacturers, but frequent recalls and issues that persist even after a voluntary recall are sure to have a negative effect on the brand image,” he says.

The nature and extent of the publicity received during the recall phase also has a lasting impact on the brand, sometimes more than the recall itself. Singh says there have been instances of model sales slowing down considerably due to the negative publicity received during the recall phase and reports of manipulations of specifications. “On the other hand, some leading players have had no effect on their brand image, as the recall process and communications were systematically and smoothly handled,” Singh adds.

Hyundai India’s Srivastava says if recalls happen very often in a particular product, it is not a good thing. “In the case of Santa Fe, we identified a faulty stop-lamp switch and replaced it at no cost to the customer. We ensured that the recall and fixing process remained smooth.”
General Motors’ P Balendran is of the view that recalls only deepen the bond between a customer and a manufacturer. “A vehicle recall doesn’t affect the brand image or a product negatively. In fact, it works in the opposite direction. Because it is a voluntary recall, the OEMs (original equipment manufacturers) are only increasing the customer’s trust in their product, that the product we have sold them is not only safe, but also of the highest quality. A recall ensures transparency,” he says. Chevrolet even has a page on its website called the ‘Chevrolet Voluntary Recall Campaign’.

A recall can be for replacing, say, a faulty stop-lamp switch (a seemingly minor defect) or, say, for replacing defective airbag parts (a scary proposition). Japan’s Takata is a major supplier of airbags worldwide and lately it received bad press—the propellant in Takata’s airbag inflators could degrade and cause them to tear loose from their brackets, blowing pieces of their housings into the faces of the occupants. In fact, in India, Nissan recently recalled around 9,000 units of the Micra hatchback and Sunny sedan to replace defective airbags made by Takata (in India, Takata operates as a joint venture between Takata Corporation and Anand, an Indian automotive company). But in the case of the Audi A4 sedan’s airbag control unit, the company has said fixing required only a software update and no components needed to be replaced.

This leads to the question—how should Indian companies decide when to recall a vehicle? KPMG’s Singh says, “Car owners need to be informed if their cars are at risk with instructions on how to handle it and the extent of the risk they face. Ideally, any widespread vehicle malfunction should be recalled and even small defects that threaten the safety of passengers need to be given a high priority. Car manufacturers may recall or offer a part replacement for minor changes to ensure their brand credibility and trust in consumers is preserved.”

P Balendran of General Motors adds, “We work with our suppliers continuously to monitor spare parts in the long term. At General Motors India, customer satisfaction is the priority and if we find that there is any error whatsoever in a vehicle, whether manufacturing or related to spare parts, however small, we will voluntarily and proactively recall the vehicle.”

The amendments to the Motor Vehicles Act—called the draft Road Transport Safety Bill (RTSB)—could be discussed in Parliament in the winter session. The RTSB can empower consumers to initiate a recall in case a manufacturer is reluctant to do so. Singh says today Indian consumers are being made aware of their rights due to the number of recall incidents that have been in the media limelight. Also, consumers pay a huge amount to buy cars, which makes them less tolerant to manufacturing defects. “Stringent norms will force car manufacturers to take complete responsibility towards defective vehicles and driver safety. Similar to developed markets, any move by the government to have strict regulatory norms over recalls and to empower consumers to initiate recalls will result in greater accountability and a safer driving environment,” he says.
Maruti Suzuki’s Kalsi says, “A proactive recall safeguards consumer interest. The government has come up with a draft policy covering various aspects of road safety and it is open for public discussion.”

Hyundai’s Srivastava adds, “Recalls need to be mandated by a national authority in consultation with various stakeholders to bring in transparency, uniformity and accountability.”

Balendran of General Motors says, “We will have to wait and watch for the fine-print, as it is at an early stage. In terms of recall policies, SIAM’s (Society for Industrial and Applied Mathematics) voluntary recall code has already paved the way for a structured vehicle recall exercise in India, which is being followed by all OEMs.”

Will recalls be made mandatory? We will have to wait until December for that answer. Should recalls be made mandatory? Here, we have different opinions. In fact, recently, even SIAM questioned one of the provisions of the RTSB that even if 100 people complain to the authority about a particular defect in any car, the authority can order a recall on its own. Car manufacturers certainly won’t want this.

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