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Return to sender: resolving the automotive-recall resurgence

Recalls have become big news again, and the industry requires better ways to anticipate and mitigate them rapidly and surely

After decades focused on vehicle quality, the auto industry faces a new challenge—vehicle quality. While automakers and suppliers have made giant strides in reducing product and process variability, vehicles’ digital features and functional complexity have exploded, forcing the industry to play catch-up with proliferating software and electronics problems.

More and bigger recalls

In the United States, for example, the number of vehicle recalls has grown over the past 20 years to the point where in 2016, the market experienced more than 1,000 vehicle recalls for the first time (Exhibit 1). In 2017, on average, 3.1 vehicles were recalled for each vehicle sold.

The scale of each recall has grown as well. Prior to the major airbag recall in 2015, the average number of vehicles involved per recall rarely surpassed 30,000 units. Since then, volumes peaked in 2016 at 90,000 vehicles per incident and remained high in 2017 at 46,000 units.

Issues concerning airbags—critical safety-related components—have driven most automotive recalls since 2015, when they comprised 71 percent of the total units recalled. Electrical and electronic (E&E) systems made up about 6 percent of the units recalled that year. Recently, airbag issues have declined, as measured by recalls, but E&E defects have increased, resulting in almost three million vehicles recalled in 2017, doubling the 2016 count.

As more companies move to modular designs and common product platforms and supply-chain partners, it becomes more likely that a defect on a single module or component can affect multiple vehicle platforms. The overall effect is that the complexity and reach of quality issues have increased. For instance, half of all recalls today affect more than one model, and 14 percent more than one brand. This may explain why automotive OEMs have not achieved any significant economies of scale on the number of recalls per model. Even large OEMs with more models tend to have the same number of recalls on a per-model basis.

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SOURCE: McKinsey & Company

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