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Oct. 9 (NBD) -- SAIC Motor Corporation Limited (600104.SZ, "SAIC Motor") saw it stock touch a limit-down Monday, the first trading day after China's National Day holiday, ultimately closing down 9.83 percent to 30.01 yuan (4.3 U.S. dollars) per share.

This came after the recall announced by SAIC General Motors Corporation Limited ("SAIC GM") before the holiday. SAIC GM is a 50-50 joint venture between SAIC Motor and General Motors. 

On September 29, the State Administration for Market Regulation of China published a notice indicating that SAIC GM would recall 3,326,725 vehicles over suspension flaw starting from October 20. The recall includes Buicks, Chevrolets and Cadillacs made between March 2014 and September 2018. 

This marks the largest recall in China's auto market since the implementation of the Administrative Regulations on Recalls of Defective Automobile Products. 

Patented design turns into "hidden danger"

The faulty units involve cars produced from 2013 until this year, specifically including 2.47 million Buick cars, 720,000 Chevrolets, and 140,000 Cadillacs.

SAIC GM stated that the models were rescinded because of a defect in the split-type control arm bushing of the front suspension system. External strain may deform or break the control arm bushing, which may lead to a loss of control under extreme conditions. The company will install integrated lower control arm bushings for affected vehicles for free. 

It is worth noting that SAIC GM got a patent for its split control arm busing design on November 27, 2013, declaring that it decreases the overall mass and saves costs. The design has been widely applied for as long as four years thereafter.

In fact, it is not the first recall by SAIC GM. Back to December 2017, the company decided to take back 806,367 Chevrolet Cruze vehicles in China due to power steering-related issues. 

SAIC Motor expects no vital impact, but its shareholders suffer great loss 

According to SAIC Motor's report for the first half of this year, SAIC GM contributed 53 percent to SAIC Motor's half-year net profit, reaping 10.24 billion yuan (1.48 billion U.S. dollars). Meanwhile, data from SAIC Motor shows SAIC GM sold 158,616 vehicles in August this year, a rise of 6.5 percent over last year.

With regard to the impact of the joint venture's recall, SAIC Motor stated in an announcement late Monday that it expected no vital influence from the incident.

But SAIC Motor's stakeholders are not that optimistic. 

Up to the end of the second quarter of 2018, China Securities Finance Corporation Limited (CSF) Central Huijin Asset Management Co., Ltd., and investors via the Stock Connect link are among the top ten tradable stakeholders of SAIC Motor, altogether holding 887 million shares of the carmaker, equivalent to a stake of 7.71 percent. 

Based on the 9.83 percent drop on Monday, it can be seen that the loss of the abovementioned three parties approached 3 billion yuan (434.7 million U.S. dollars). 

According to financial information vendor Wind's Statistics, 57 other public offerings of funds with a total of 323.7 million shares in SAIC Motor suffered a loss of nearly 1.1 billion yuan (159.4 million U.S. dollars) Monday.

Email: wenqiao@nbd.com.cn