The General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) held a hearing on October 26 about the China auto warranty regulations. Industry and consumer representatives were invited to the hearing and no one came out pleased. Although consumer representatives took eight out of the 16 seats in the hearing, they did not feel hopeful about the progress. There were no consensus between any parties after the hearing and no information about the next hearing.
The latest draft of the regulations is comically low when comparing to some of the current industry standards. But the industry does not buy it either. Both joint ventures and self-owned brands are not fond of the new watered-down regulations. Self-owned brands fear this would be another blow to their profitability which is easy to understand. But JV brands which have similar or higher warranty standards are backing away from the regulations.
What a national warranty standard does in fact is to give self-owned brands a leveled plain field. Self-owned brands have been introducing their mid- and high-range models to the market for a while but most were not well received by consumers. This is mainly because consumers do not associate self-owned brands with high quality and warranty. But when warranty regulations are in place, many Chinese consumers will be encouraged to buy self-owned brand models which are bigger bang for the buck. Because they are guaranteed by law that the cars they bought can be replaced, repaired or refunded if it breaks down.
This is bad news for JV brands because guaranteed quality had been a brand signature for JVs for a long time. Less regulation in the market amplifies their brand advantage. Regulations evens out the quality differences of different products. No wonder they are against the warranty regulations.
Self-owned brands should get their heads straight and endorse the warranty regulations.