For the first time, new car buyers in China could have the right to return a faulty car and ask for a replacement or refund. The protection is part of a new warranty regulation first proposed last September by the General Administration of Quality Supervision. The latest draft of the regulation was released on January 16 to solicit further public opinion following a hearing in October that included representatives of manufacturers and consumers. If the most recent version is adopted, customers will be eligible for replacement of faulty cars in the first two years or 50,000 km of ownership if attempts to repair serious flaws are not successful ― a longer period than the previous draft’s two-year, 40,000-km standard. It also requires free repairs in the first three years or 60,000 km of ownership. The draft extends the timeframe for car buyers to return a failed vehicle ― up from the 30 days in the previous version to 60 days or 3,000 km ― if there are serious quality problems such as severe cracking in the car body, non-functioning brakes or steering and oil leaks. Owners are also eligible for a replacement if repair work takes longer than 35 days or if the car is in the shop five times for the same quality problem. The new draft says car sellers are responsible for free repairs, replacement and returns, but they in turn have the right to seek remedy from manufacturers.

Toyota’s Lexus Division aims to boost sales in China by more than 50% to 88,000 units this year. By the end of the year, it will have 100 authorized dealer outlets in operation, up from the 81 dealerships to date. Lexus sold 56,303 vehicles in China last year ― a modest increase of 6% over its 2010 tally of about 53,000 ― at the same time China’s luxury market soared by nearly 40% to 950,000 units. A major reason for the shortfall was the Japan earthquake that caused production halts at most of the nation’s carmakers and components suppliers. Production by Lexus only started to recover in July. By the end of last year, the brand had sold more than 210,000 cars since it arrived in China in 2005. Its import lineup now includes 15 models, four of them gasoline-electric hybrids. Sales by Lexus in China doubled every year from 2005 to 2007, yet the pace slowed in 2008 and 2009 due to increased taxes on cars with large engines. At that time, almost all imported Lexus models had engines larger than 3 liters. Lexus then began to introduce more cars with small engines as well as hybrid models. It regained some momentum in 2010 with delivery of about 53,000 cars, more than 65% of them powered by small engines. Yet the Japanese brand’s sales in China still trail far behind its German competitors. Audi sold more than 300,000 cars in the country last year and BMW moved about 232,000. Sales by Mercedes-Benz surpassed 198,000. All three have local joint ventures to produce cars at more competitive prices than imported models. Analysts said that without local production, Lexus is not likely to see significant growth in sales and market share in China. Lexus cars are currently built only in Japan and the U.S., the China Daily reports.

China’s two most historic and famous cars, Hongqi (Red Flag) and Shanghai may get a second life as the country wants to use domestic vehicles as official cars. The revival may have repercussions for Audi, which currently supplies the majority of the nation’s official vehicles, said analysts. China is the German luxury-car brand’s largest market. Recently, the Ministry of Industry and Information Technology (MIIT) included three Shanghai-branded car models in its new vehicle product list. The engine capacity of 1.8 liters indicates the new models of the old brands ― which all but disappeared from the market for two decades ― will be medium-sized sedans, in line with the requirements for official cars. Chinese newspapers also reported that the country will promote the use of Hongqi sedans ― which in 1958 were China’s first domestically produced cars ― as limousines for officials at the level of Minister and above. FAW’s Chairman Xu Jianyi has previously said that FAW will launch several new products under the Hongqi brand this year, with one tailored for official use. The other models will include limousines for ceremonies and parades. In a 2009 plan to restructure and revive the automobile industry, the Chinese government said that domestically made cars should account for more than 50% of official fleets at all levels of government. When then U.S. President Richard Nixon visited China in 1972, the state guest fleet had 20 Hongqi and 100 Shanghai cars. But unlike the Hongqi ― which was mainly used by government leaders ― Shanghai cars were said to be closer to ordinary people as they were more widely used for common official business and taxi services. After SAIC formed a joint venture with Volkswagen in 1985, the assembly line for Shanghai cars was moved to a new location. Production ceased in 1991. Only about 80,000 Shanghai brand cars had ever been made. SAIC has two other wholly-owned car brands, Roewe and MG. The company announced last year that it will invest CNY22 billion in improving its own brands between 2011 and 2015. They now contribute less than 10% of the group’s total sales. SAIC sold more than 4 million vehicles in 2011, up 12% over the previous year. The vast majority of sales and earnings come from its joint ventures with General Motors and Volkswagen. Chinese-brand cars now account for less than one-third of the national market.

The Alliance for American Manufacturing (AAM) has accused China of providing illegal subsidies to its car-parts sector that threaten to destroy more than a million U.S. jobs. The AAM – which groups the U.S. steel industry and the United Steelworkers Union – said alleged trade violations by China have led to the loss of 400,000 jobs in the U.S. vehicle supply chain, and threaten 1.6 million more. AAM Executive Director Scott Paul said three studies present “pretty compelling” evidence of China breaking World Trade Organization (WTO) rules against subsidized exports. “For U.S. makers, the cost of their inputs is greater than what the Chinese producers sell their products for” in some cases, he said. The AAM argued that Chinese car-parts exports increased more than 900% in the decade to 2010 helped by USD27.5 billion in subsidies, many of them illegal, and that the government has committed nearly USD11 billion more in such support over the next decade. “In auto parts, China runs trade deficits with every other major auto producer, including Japan, South Korea, and Germany. In contrast, China’s trade surpluses on auto parts with the United States constitutes a notable exception,” said Usha Haley of the Economic Policy Institute, who contributed one of the studies. Haley also blamed U.S. carmakers for buying more China-made parts.

China’s passenger car sales declined 16.5% in January from a year earlier as auto buyers put off purchases during the Lunar New Year holiday. Carmakers sold a combined 1.17 million passenger cars last month, compared to 1.4 million units sold in the same month a year earlier, according to China Passenger Car Association (CPCA). Production also dropped 24% from the same month in 2011. Sales of sport-utility vehicles (SUVs) dropped 9% and those of multi-purpose vehicles (MPVs) 22%. Deliveries of minivans slumped 24% from a year earlier. General Motors said deliveries to Chinese dealers fell 8% to 246,654 vehicles in January, from 268,071 a year earlier. SAIC, which makes cars in partnership with GM and Volkswagen, said it delivered 380,305 vehicles, down 8.48% from last year. China’s overall vehicle sales will probably increase 8% this year, according to the China Association of Automobile Manufacturers (CAAM). Deliveries slowed to 2.5% in 2011 from the 32% rate in 2010, after the government withdrew a two-year package of tax breaks and rebates that saw the country overtake the U.S. CAAM Secretary General Rao Da said that the fact that the Spring Festival fell in January this year will provide a year-on-year sales increase of around 30% in February. Vehicle sales growth in China last year lagged behind the U.S. for the first time in at least 14 years, according to figures from the Chinese industry and U.S. researcher Autodata Corp.

The CAAM predicted that total domestic vehicle sales in 2012 will be about 20 million units, with year-on-year growth of 8%, and exports would be between 1.05 million and 1.1 million units this year, a rise of between 25% and 30% from 2011. Global marketing firm JD Power still expects up to 40% of the world’s car sales growth this year to come from China. It said the market share held by emerging countries in light passenger vehicle sales, which jumped from less than 20% in 2005 to 51% last year, would continue to grow to more than 55% by 2015, with China and India topping the list. China’s passenger car sector is unlikely to resume the robust growth seen in 2009 and 2010 when tax breaks and government subsidies boosted sales to unprecedented growth of 55% and 33% respectively, according to Marvin Zhu, Analyst with LMC Automotive. Analysts warned that 2012 would be a year of transition for China’s car industry, during which sustainability would replace quantity as the focus of development for the future.

With two joint ventures in China, GM sold approximately 2.55 million vehicles in China last year, which accounts for more than a fourth of its global tally. About half of the vehicles sold were minivans. At Volkswagen, Chinese consumers accounted for more than a quarter of its 8.16 million vehicles delivered last year. The Renault-Nissan alliance reported combined sales of over 8 million last year and about 1.27 million cars were sold to the Chinese. Toyota sold just 880,000 vehicles in China on global sales of 7.95 million last year, but plans to boost its sales in China to over 1 million units this year. The fifth-largest automaker, Hyundai-Kia of South Korea, enjoyed strong sales in China with more than 1 million vehicles sold last year.