SHANGHAI -- The recalls Toyota Motor Corp. is being forced to carry out in the United States and around the world offer a timely lesson for domestic Chinese brands.
The lesson is: no matter who you are, there is a limit to the speed at which an automaker can grow sustainably. If that speed is exceeded for short-term gain, overall long-term growth will suffer.
Thanks to government incentives for small displacement cars, passenger vehicle sales in China surged 47 percent in 2009. The huge expansion was a boon to domestic and international automakers alike. Yet there is evidence that for homegrown players, the booming market has engendered overconfidence and a dangerous complacency.
While international brands are expecting to achieve sales growth of between 10 percent and 20 percent this year, most domestic Chinese brands are targeting to sell at least 50 percent more cars than last year.
BYD Auto Co., for one, plans to boost its 2010 sales to 800,000 units, up from last year's 445,097 units. Two other major domestic Chinese automakers -- Chery Automobile Co. and Changan Automobile Co. -- both seek 60 percent growth in sales this year.
Pushing for such a high rate of growth is sure to strain their resources. They will risk compromising the quality of their products, as happened with Toyota when it overlooked defects in its race to become the world's biggest automaker.
While the Toyota brand has certainly been tarnished, there is a good chance the damage can be repaired. Toyota's wealth of expertise gives it the ability to restore its once-famous quality control. A reputation that took decades to build cannot be undone in a few months.
Not so for domestic Chinese automakers, who are struggling to hold market share and have no such reputation to speak of. Through such reckless pursuit of growth they risk sacrificing their product quality. In the long run, this will jeopardize their very survival in the market.