Vehicle recall deals blow to Toyota's China hopes

Toyota issued its biggest vehicle recall in China after it revealed that the window controls on 690,000 passenger cars could short-circuit and catch fire.

The recall, which involves Camry and Yaris models built at factories in China, deals a heavy blow to Toyota's reputation in the world's fastest growing car market — one in which the Japanese manufacturer can ill afford to lose ground to expanding Chinese manufacturers.

The recall comes as Toyota has been repositioning itself to benefit from emerging market growth. Reports on Monday suggested that Toyota was planning to manufacture a "low-priced family entry car" in China, Thailand, India and Brazil. As part of the same drive, the company will be moving more of its engine production from Japan to the United States.

Japanese carmakers have fought to carve a position in China, where domestic companies are rapidly improving their products and boosting production. Hammering home a reputation for reliability has been key to the Japanese pitch and yesterday's recall, analysts said, might represent a significant setback.

The Auto Shanghai show this year played host to Chinese carmakers brimming with confidence in their products and eager to establish themselves as the dominant forces on the domestic scene. Industry sources have criticised the relatively low quality of Chinese cars, but acknowledge that the vehicles are improving constantly.

The recalled vehicles include 281,000 Vios and Corollas. All the cars were produced at Toyota's joint ventures with Guangzhou Automobile Industry Group and Tianjin FAW. The components were produced in China, restoking concerns among analysts that Toyota is having difficulty maintaining quality in its Chinese supply chain.

Toyota produced 547,000 cars in China last year, all of which were destined for the domestic market.

Private car ownership in China has grown at about 20 per cent annually since the beginning of the decade, prompting Japanese carmakers to focus their attentions there as their domestic market contracts.

The problem with the recalled cars appears to be overlubrication of the switch. Grease, Toyota said, could slide into the electronics and cause a short circuit. No switches had burst into flames.

Toyota was forced to recall 260,000 Chinese-built cars in April because of a problem with the brakes.