FRANKFURT/SHANGHAI (Bloomberg) -- Volkswagen, Daimler and BMW all posted record global sales last year, fueled by demand in China.
This year, that growth is at risk as the government in Beijing steps up scrutiny of the automakers and media outlets question their quality.
VW last month recalled 384,181 vehicles in China after state television featured complaints about vibrations, loss of power and sudden acceleration in models including the Golf.
China Central Television also reported that BMW, Audi and Mercedes owners experienced dizziness from asphalt in their vehicles.
"Of course we take the concerns in China very seriously and are investigating the matter," Joachim Schmidt, sales chief at Mercedes, said last week. Yet he said he was surprised by the complaints.
"The components we use have been thoroughly tested before and we use them in vehicles across the globe," he said. "You would assume that customers outside China might notice something similar."
The reports come as Chinese authorities have vowed to unmask producers of low-quality or dangerous goods. While Chinese companies haven't been spared scrutiny, foreigners are frequent targets. In the past year, China Central Television has reported that McDonald's Corp. sold chicken wings past their sell-by date, Carrefour SA mislabeled lower-quality chicken as premium, and Apple Inc. failed to replace the back covers of iPhones after repairing electronics inside. All have issued apologies and offered fixes.
Representatives at China's General Administration of Quality Supervision, Inspection and Quarantine weren't immediately available to comment.
China, the world's largest auto market, is critical to German automakers' ambitions of record deliveries in 2013 even as European sales are expected to contract for a sixth straight year. The carmakers can expect to face questions about quality standards during media events this weekend at the Shanghai auto show.
"The three most important things to do when a problem like this occurs are analyze, analyze and analyze -- and then be fast in solving the issue," said Wolfgang Hatz, Porsche's r&d chief, who oversaw engine and transmission development at parent VW Group before shifting to the sports car maker.
China sales are forecast to grow to 37 percent of Volkswagen's global vehicle volume in 2015 from 28 percent in 2010, according to researcher LMC Automotive. At BMW, China is expected to account for 24 percent of global car deliveries in 2015, double the level in 2010. Daimler is forecast to sell 20 percent of its cars in China 2015, up from 10 percent in 2010, according to LMC.
Volkswagen's sales in China grew at a slower pace than the industry average in March, the month the CCTV report aired. VW, which includes Hong Kong and Macau in its sales figures, reported that sales increased 11 percent last month. That compares with industrywide growth of 13 percent, according to data from the China Association of Automobile Manufacturers.
The VW recall may cost as much as $600 million, LMC estimates. The automaker is recalling the vehicles to make unspecified fixes to its dual-clutch transmission. VW last May agreed to extend the warranty for the transmissions to 10 years in China, the carmaker's biggest market, in response to customer complaints. The standard is two years.
Porsche pioneered dual-clutch transmissions in racecars in the 1980s.
The technology, which VW has rolled out in mass-market cars like the Golf in recent years, is a mix between a manual and automatic gearbox. VW says it has long conducted special tests on the vehicles it sells in China, driving them in different regions and climate conditions to ensure its cars hold up on the country's roads.
Audi, BMW and Mercedes have all pledged to look into complaints in CCTV's report that it found asphalt, the road-paving material also used for deadening vibrations, in samples taken from their vehicles. Owners smelled a pungent odor and experienced dizziness, the TV channel said. The companies say they are investigating the issue.
At an event today in Shanghai to unveil the GLA compact crossover concept, Daimler CEO Dieter Zetsche said there was no "real substance" to state media reports about strong odors being detected in Mercedes vehicles.
"We'll take care of any customer who's not satisfied," Zetsche said.
Separately, the CEO said that the company plans to introduce seven vehicles in China this year, ranging from the A class to E class to the pricier S class as part of plans to bring in about 20 new or face-lifted vehicles to the country by 2015.
German carmakers spend billions of dollars each year on technology to protect their images. Fueled by these investments, BMW, Audi and Mercedes have tightened their grip on both the global and Chinese luxury car sectors in recent years.
The government may in part be targeting the Germans because of their success, especially when compared with the slow development of China's domestic auto industry, said Philippe Houchois, an analyst with UBS in London. "This kind of attack or pressure on the foreign brands, and the Germans in particular, reflects the frustration," he said.
As they boost production and sales in China, the German carmakers must be vigilant about their reputations, said Lars Voedisch, managing director at public relations consultancy PRecious Communications in Singapore.
VW plans to spend 9.8 billion euros ($12.9 billion), together with joint-venture partners, by 2015 to add new factories and capacity in the country.
"Even when it's unfounded, they have to react," Voedisch said. "It's something that doesn't go away and the Chinese media and online community will just accelerate and it'll stay there."