Reality check for China’s carmakers as authorities tell them to focus on quality, not tech

China's shrinking car market has been dealt another blow as authorities intervene to ensure quality over technological advancements. A nationwide inspection campaign, announced this week, will scrutinize the quality of Chinese-made vehicles, potentially dissuading consumers from purchasing, and exacerbating the already cautious outlook for the nation's automotive sector, according to dealers and analysts.

Vice-Minister of Industry and Information Technology, Xin Guobin, warned that new auto products and technologies would be barred from entering the market unless they passed stricter approval procedures, highlighting that some "reckless innovative designs" had been installed in vehicles without adequate testing and verification. The campaign, set to begin soon, stems from several incidents that raised concerns about car quality and the safety of autonomous driving technology.

Analyst Gao Shen noted that with improved oversight, carmakers will have to shift their focus from making vehicles more intelligent to ensuring quality. Tragedies, such as the March 2022 crash involving the Xiaomi SU7, which resulted in three fatalities, have prompted Chinese authorities to tighten their oversight of autonomous driving technologies.

Recent complaints about EV battery quality have also raised concerns. Despite China's carmakers and automotive suppliers being at the forefront of EV technology and production, driven by government support and consumer demand for innovation, intense price competition and the constant rollout of new models have become a "enemy within" for the industry, according to UBS's China car research head, Paul Gong.

July saw a 20.9 per cent year-on-year decline in overall car deliveries, including both petrol-powered vehicles and EVs, with EV sales falling by 3.9 per cent year-on-year as government incentives weakened and consumer demand lagged.