Gearbox recall in China expected to cost Volkswagen over $600 million

Article by Anita Panait, on March 22, 2013

Volkswagen AG recalled 384,181 vehicles in China to replace defective transmissions that may lead to acceleration loss. The vehicle recall is expected to cost Volkswagen over $600 million. Volkswagen and its joint ventures recalled models like the Golf, Magotan, Sagitar and Audi A3, according to China's quality inspector.

Research firm LMC Automotive put the cost of the replacements to be between CHY3,000 ($483) and CHY10,000 per vehicle. The recall is considered to be a major setback to Volkswagen as the German company aims to become the largest carmaker in the world by 2018, with China being its biggest market.

Volkswagen’s recall came less than a week after state broadcaster China Central Television showed Volkswagen’s Chinese customers complaining about abnormal vibrations, loss of power and sudden acceleration in vehicles fitted with the carmaker’s proprietary gearbox technology.

Bill Russo, president of auto consultancy Synergistics Ltd, noted that dealing with an issue “that plays out in the public's eyes” always damages reputation. He added that Volkswagen’s concern should be how and when it could recover from the damage done by the defective gearboxes. The German carmaker is recalling vehicles fitted with a seven-speed version of its direct-shift transmission.

It has promised to incur the cost for replacing defective equipment and upgrading the software. Volkswagen sold around 680,000 vehicles fitted with the potentially faulty DSG gearboxes, LMC estimates. Volkswagen China spokesman Christoph Ludewig remarked that there have been no injuries or accidents reported due to the DSG gearbox problem. The recall includes 21 types of vehicles including variants of the Scirocco, Bora, Touran, Octavia, Passat vehicles built between 2008 and March 2013.

Topics: vw, china, recall

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