NV350 URVAN Image: Nissan
The recalled vans are known for being utilized heavily by companies, for the transportation of people or goods. A recall of 16,000+ vehicles hurts countless companies that employ their services in the country.
In February, the Ministry of Economy announced the recall of 226 Lincoln Continental cars (2017-2019 model) and 158 Lexus LS500 (2017-2018 model), manufactured in the US. This was due to a door latch manufacturing error.
A day earlier, the ministry had announced a recall of 158 Lexus LS500’s (2017-2018 model), due to an improper tire to wheel assembly process.
In January, the Ministry of Economy’s Consumer Protection Department ordered the recall of 3,511 Audi A4, A4 Cabriolet and A6 models.
2018 was another eventful year, where the country saw upwards of 70,000 vehicles recalled in the first seven months of the year, Khaleej Times notes. Among the recalled vehicles were 4,000 Mitsubishi units, over 9,300 Hilux and Prius vehicles, and nearly 54,000 units of Pajero.
The issue of quality control
The boom in recall quantity in the UAE has not been an isolated case, but a worldwide problem.
“After decades focused on vehicle quality, the auto industry faces a new challenge—vehicle quality,” McKinsey writes. “While automakers and suppliers have made giant strides in reducing product and process variability, vehicles’ digital features and functional complexity have exploded, forcing the industry to play catch-up with proliferating software and electronics problems.”
“In the United States, for example, the number of vehicle recalls has grown over the past 20 years to the point where in 2016, the market experienced more than 1,000 vehicle recalls (i.e. recall orders) for the first time,” McKinsey continues. “In 2017, on average, 3.1 vehicles were recalled for each vehicle sold.”
Chart: McKinsey & Company
It seems that in a rush to catch up with the competition, car manufacturers have had to constantly implement newer and newer tech in their cars, and quality control simply hasn’t been able to keep up.
Recalls and their impact on car manufacturers
While customers and governments are surely affected in the scenario of a recall, it is car manufacturers that are most impacted.
Most notably, there is the factor of cost to consider. Take the example of the recalled 16,365 Nissan vans, where a faulty engine room was identified which could lead to further complications. That’s thousands of owners that need to be contacted, that then need to schedule appointments to bring in their cars. Then, you’ve got to keep in mind the number of hours that need to be put into disassembling the engines and addressing the fixes, and the cost of replacing the faulty parts.
Needless to say, the whole operation would cost countless hours of manpower, thousands of dirhams, and a major delay to day-to-day operations.
But that’s not all.
Consider also the implications to Nissan’s reputation, and subsequently, its market value.
In 2010, when Toyota recalled millions of faulty vehicles, $30 billion were shaved off its market value – or 22% of its total value.
“For multi-billion dollar companies, an expensive short-term loss can be easily overcome, but when shareholders and customers lose confidence, there may be greater long-term effects such as plummeting stock prices,” Investopedia explains.
At times, recalls can also lead to lawsuits, especially if a customer was injured or killed due to a faulty vehicle.
Usually, car manufacturers, being as big as they are, are able to absorb the PR and cost shock, but that doesn’t eliminate the fact that as technology improves, recalls should become less common.
It will be up to these companies to try and balance keeping up with the competition with maintaining quality control.