When Life Gives You Lemons, Make New Law

The Chinese automotive industry (both domestic and import) has grown exponentially in recent years.  Reportedly, some of the consumers driving this growth have complained of defects in the vehicles they purchased, and apparently, some of them feel that their complaints have been ignored. This problem received attention in a YouTube video featuring several men destroying an Italian sports car with sledge hammers.  According to the video’s caption, a Chinese man purchased a Lamborghini Gallardo, and much to his dismay, the engine would not start.  He believed that his attempts to reach out to the manufacturer and Chinese affiliates were ignored, so naturally, he decided to make a statement by paying a group of men to destroy his vehicle.  The aggrieved Lamborghini purchaser succeeded in making a statement, as his destruction video has received over 722,000 hits on YouTube.

In the United States, consumers have legal redress if the vehicle they purchase turns out to be defective.  Most states have a “lemon law” which protects consumers in the event that they have purchased a defective vehicle, or a “lemon.”  For example, South Carolina has legislation in place which  requires the manufacturer of a new vehicle to conform to all express warranties within the first twelve months of purchase or first 12,000 miles of operation, whichever occurs first (S.C. Code Ann. § 56-28-30).  If the vehicle is nonconforming as defined by the statute, the manufacturer is required to make necessary repairs if the consumer provides requisite notice to the manufacturer.  Alabama’s lemon law protects consumers from certain defects in specified vehicles for two years or 24,000 miles, provided that various notice and other requirements are met.  (Code of Alabama §§8-20A-1 through 8-20A-6).  Until recently, China had no such law, so Chinese consumers were stuck with the costs of repair of a defective vehicle, or the cost of a sledgehammer mob if they decided to go that route.

On October 1st, 2013, a new Chinese law went into effect to address the apparent spate of consumer complaints regarding lemons.  The law is known as San Bao, or The Three Guarantees. The law is part of a consumer protection plan engineered by the Chinese government to protect consumers.  San Bao allows the manufacturer and/or consumer to choose from three methods of making the purchaser of a defective vehicle whole:  repair, exchange, or return.  The law is meant to balance consumer protection with the interests of the Chinese automotive industry. The immediate effect on the consumer is obvious, but the costs to the Chinese automotive industry are uncertain at present. At the moment, Chinese automotive sales are perhaps the biggest driver in the global automotive sector, and with some predicting Chinese automotive sales to nearly double by 2019, San Bao could have a global economic impact. We’ll keep you posted on this front.