China: Learn From The Valiant Comrade LaHood! Painfully Penalize Carmakers!

Did someone say that the Chinese are good at – how shall we put it – warming up to foreign ideas? Ray LaHood’s revenue-generating ideas must have impressed the hell out of the Chinese. I can just imagine the discussion: “Come on, the Americans raise the penalty from $16.4m to $200m, so why can’t we? It’s in the name of safety. Ni dong bu dong?” Now therefore, “the Chinese government is set to impose much stricter penalties on automakers if they hide problems with their vehicles to avoid recalls,” reports The Nikkei [sub].

So far, automakers got away with a financial slap on the wrist. Under current rules, introduced in 2004, covering up automotive defects can cost a pittance of $4430, max, no matter how many cars are affected. Under newly proposed rules, hiding a defect could downright wipe out an automaker in China.

If approved, the new rules will raise the penalty to up to 50 percent of the total value of the recalled cars. Yes, you did read right. Say 100,000 cars not timely recalled ( a handful by today’s recall standards,) say $20000 per car, maximum penalty a cool billion dollars. Tong! Tong!

In the land of intentional ambiguity, of course there would be some leeway. The proposal calls for penalties from 2 percent to 50 percent.

So far, it’s only a draft by the General Administration of Quality Supervision, Inspection and Quarantine, China’s quality watchdog. The body is soliciting opinions from consumers and manufacturers through July 10 and will finalize the rules based on that input. The State Council, China’s cabinet, may put the regulations into effect later this year. Or maybe not. Automakers (who have a lot of political clout, many are owned by some kind of a government) will not like it. Chinese consumers know that this would make the cars more expensive. China loves a deal. And the Chinese government doesn’t need to shake down carmakers to generate revenue.