Jianghuai Auto Slumps After Announcing Recall: Shanghai Mover

Anhui Jianghuai Automobile Co. (600418), Ltd. slumped the most in more than four years in Shanghai trading after the automaker announced the biggest recall of vehicles in China since November.

Shares of Anhui Jianghuai dropped by its 10 percent daily limit to 6.41 yuan in Shanghai trading, the biggest decrease since February 2009. The stock was suspended yesterday. The benchmark Shanghai Composite Index rose 0.8 percent to 2,257.43.

The Anhui-based carmaker will recall 117,072 Tongyue model cars in China starting March 30, China’s quality regulator said on its website today, after a China Central Television reported the company sold vehicles with rusted chassis. The recall underscores the quality concerns dogging Chinese automakers as they continue to lose market share to foreign brands owned by General Motors Co. (GM) and Volkswagen AG.

Rusting on the Tongyue occurred because the vehicles, first introduced in 2008, didn’t meet some technical standards, the company said in a statement to the Shanghai Stock Exchange today, following CCTV’s annual consumer rights program on March 15 that also singled out Volkswagen vehicles with defective gearbox systems.

Jianghuai Auto has produced 119,271 Tongyue cars as of Dec. 31, 2011 and the recall will have some impact on its 2012 financial results, the company said in the statement.

China has introduced recall laws this year that give the country’s quality watchdog broader powers to order investigations and impose fines should manufacturers and importers fail to recall faulty products in a timely manner.

Volkswagen (VOW) said on March 16 it plans to recall vehicles in China after CCTV said some owners reported abnormal vibrations, loss of power and sudden acceleration in their cars. In November, a unit of Zhejiang Geely Holding Group Co. widened an initial recall to 255,958 vehicles due to risks of leakage from improperly placed fuel tanks.

To contact Bloomberg News staff for this story: Penny Peng in Beijing at ppeng18@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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