CNBC - Car makers like Toyota, GM, Ford and Honda from around the world had recalled batches of vehicles to fix some bug or the other. While some of these have been voluntary, many have been because the industry rules have demanded it. But in India, despite being on the anvil for nearly two years, there's still no mandatory recall policy, reports Sunanda Jayaseelan of CNBC-TV18.
America, Japan, the United Kingdom, France, Germany and Australia, almost every country in the world has a recall policy in place that demands manufacturers to fix any potential problems with their products in the interest of public safety. Some have had a policy in effect for over 30 years but not India.
Auto industry body Siam has been working on a recall policy for over two years now and hopes its voluntary recall policy which was first mooted in July last year, will be made mandatory by the government soon.
The guidelines call for manufacturers to voluntarily rectify safety defects arising from malfunctioning steering and brakes systems, unintended fuel leakage, cracked or broken wheels, and problems in wiring and not just for cars that are within the warranty period.
The guidelines require that a car manufacturer recall vehicles if defects are detected within seven years from the date of manufacture. However, because the rules are for a voluntary recall, it is up to the manufacturer to decide whether the number of vehicles affected is sufficient to justify such a recall.
No surprise then that considering the costs involved, not to mention the impact such an exercise has on the brand image, most manufacturers are not too keen on a mandatory recall policy.
V Ramakrishnan, MD, South Asia, Frost & Sullivan, says, "OEM's still don’t have product liability insurance since until recently there was no voluntary recalls also. There are several costs involved for OEM's like financial burden, reputation damages and also compensation liable to consumers."
For instance, M&M recalled 30,000 XUV500s to fix defects in the left wiper, the front power window system, and the fluid hose. Experts say this recall will cost the company around Rs 1.5 crore. It is learnt that as things stand, most companies pass on the lion's share of the cost to their vendors. However, auto majors insist that they share the cost with vendors who supplied the defective parts.
Pawan Goenka, CEO - Farm & Automotive Division, M&M , says that as far as bearing the cost is concerned, it has nothing to do with having or not having recall as it is most manufacturers have an agreement with the suppliers who will bear the cost depending on who is responsible for the failure. In most of our contracts we would have that agreement.
Then there is the penalty factor. A mandatory recall policy will impose a penalty on car-makers who go in for a recall, and this penalty will be on par with what their global counterparts pay.
One major argument car-makers have against bringing in a comprehensive recall policy is that the industry is already reeling under slowing demand and rising costs and additional burdens may choke an already gasping sector. However, experts argue that a mandatory recall policy is necessary to make legal compliance more stringent.
