Analysis: Australian asbestos case highlights problems with Chinese automobile industry standards

Gasgoo.com (Shanghai) - The warnings issued by the Australian Competition and Consumer Commission regarding potential asbestos in the engines and exhaust gaskets of imported Chery and Great Wall vehicles have once again highlighted the discrepancies between Chinese own brand manufacturers and multinational enterprises on the global stage. Despite the fact that the ACCC did not directly order recalls of the vehicles, both manufacturers actively issued their own recalls. The problem affected nearly 26,000 vehicles in the country. It is the first large scale recall of Chinese vehicles in an overseas market. In order to better understand the scope of the issue, Gasgoo.com (Chinese) conducted a brief survey on the issue, collecting opinions from 1,810 experts and analysts from all across the industry.

In the first question, participants were asked what they believed was the fundamental cause behind the Australian asbestos problem. 41 percent of respondents answered that it was linked to the lack of through automobile technology standards in China. 34 percent said that Chinese manufacturers did not understand regulations in overseas markets well enough, while 20 percent maintain that the vehicles' technological standards were simply too low. The remaining five percent cited other reasons.

In its official comments on the issue, Great Wall cited its unintentional negligence of local regulations in Australia, which completely forbid the use of asbestos in manufacturing vehicles and other products. Chery, meanwhile, attributed the problem to a misunderstanding with its auto part suppliers. However, there is debate on how reasonable these explanations are. Western nations began regulating the use of asbestos as early as the 1970s, with several countries, including Australia, having fully forbidden its use by the end of the century. Therefore, for Great Wall to export vehicles containing substances that have been outlawed for decades is very serious. Several analysts attribute this sort of oversight to the lack of importance Chinese manufacturers place on manufacturing regulations. They attribute the root of this mindset to the fact that China itself does not have very strict industry standards. Chery's excuse further backs up this viewpoint. Although the supposed misunderstanding between the manufacturer and its suppliers seems to be a managerial problem, it also demonstrates the lack of importance placed on industry regulations by Chinese companies.

Although China forbids the use of asbestos in vehicle engines, their use is not outlawed in the manufacture of other auto parts. Many note this discrepancy in manufacturing standards between the automotive industries in China and in overseas markets. At the same time, this lack of standards is what allows Chinese manufacturers to maintain low production costs, something which they need to ensure their traditional competitive advantage of cheap pricing in foreign markets.

At the same time, there are those who have voiced their doubts in Australian authorities' actions on the issue. They point out that Great Wall and Chery have been active in the country for several years, yet claims of dangerous substances have only been announced now. There are even suspicions that the warnings were put out on behalf of local companies to put more pressure on Chinese manufacturers.

Despite the amount of attention given to the issue, the majority of survey participants believe that it will not excessively harm the image of Chinese manufacturers in overseas markets. 54 percent of respondents said that Great Wall and Chery handled the matter appropriately, and the problem's influence will be very limited. By comparison, 32 percent answered that the issue would negatively affect perceptions of Chinese vehicles overseas. 14 percent were undecided.

Following the ACCC warning, Great Wall immediately issued a written response on the issue, which was sent to the media late the same night. Simultaneously, the manufacturer sent a notice to its Australian dealerships regarding the issue, directing them to contact all affected owners to schedule times for maintenance of their vehicles. Chery also announced a recall of its Tiggo SUVs and A3 sedans. The recall covered a total of 2,445 vehicles in Australia. The fact that both manufacturers responded to the matter promptly and accordingly should help them maintain their reputations in the country. That said, the perception of Chinese vehicles overseas is still very negative. The common consensus of Chinese vehicles being of low quality has yet to be changed, and the asbestos case has not helped improve that image in any way.

In the final question, participants were asked whether or not China should also fully outlaw the use of asbestos in manufacturing products. The overwhelming majority, 80 percent of respondents, agreed that the country should forbid use of asbestos. Only seven percent opposed the notion, while 13 percent were undecided.

China is the largest user of asbestos and its third largest producer. According to the GB12676-1999 regulations, which went into effect in October 2003, gaskets in automobile engines are not allowed to contain asbestos. However, there have been made no attempts to prohibit asbestos use in the manufacture of any other auto parts. Long-term inhalation of asbestos fibers is linked with the development of cancer and other diseases. While the existence of the substances in internal auto parts is not especially threatening to drivers, it is particularly dangerous to mechanics and other workers.

Several figures in the industry have voiced their desires to see the country take notice of the recent news and fully prohibit the use of asbestos. They point out that certain materials can be replaced with asbestos-free ones, such as stainless steel for exhaust pipes and glass fiber composites for sound and heat insulation materials.

Great Wall and Chery have already begun taking these steps. Representatives from Great Wall announced that they will stop using asbestos auto parts for their vehicles both inside and outside of China. Chery has made similar pledges. If other manufacturers follow suit, it will be a great step forward for Chinese automotive industry as a whole.