Tuesday, September 20, 2005

Auto shoto...

The Indian automotive industry is booming, heck we have some ten magazines tageting car and bike enthusiasts, not bad for a country with about an installed base of 20 million cars and some 100 million two-wheelers. Incidentally, and many of you would have read the reports, some 1 million passenger vehicles and some 6.2 million two-wheelers were sold last year. India's auto industry by domestic sales alone is worth some Rs 60,000 crore and directly and indirectly is possibly India's largest employer, so why are excise duties on cars so high? Until Jaswant Singh's sole budget, duties on cars was stuck at 32%, after Singh reduced them to 24%, he also promised that they would go down to 16% in a few years. The industry was cock-a-hoop, but the government changed and now Mrs G (Redux) wants to implement the country's largest ever 'get-rich-quick' scheme for bureaucrats - the Employment Gurantee program. Which dear friends, I assume all of you over here are nice middle-class tax-paying folk is being funded by you! In the form of expensive cars among other things. While we hear stories of the one-lakh car and all that, there is one rather clear fact, which is that if you were to remove all duties on the Maruti 800 you'll virtually get a one-lakh car, which would be a lot safer than anything the others will produce.
Let me explain my main argument againt the one-lakh car other than congestion, its safety. Auto safety has an ignored issue in India, because auto-makers all say that "The Indian consumer isn't prepared to pay for safety." Which could alternatively read, "Well, no-one has sued our pants off for making unsafe cars." But I read with a certain amount of dismay that certain parties are interested in removing clauses ofn safety in the upcoming Motor Vehicles admendments. These will mandate head-on and side-impact crash testing for cars and a safe car would cost money, because crumple zones cost a lot to manufacture. And would you want to be in a car where your chances of survival are close to nil. I guess not.
Yet, many of us in the media think that the one-lakh car is manna for the masses - it will help the masses who own two-wheelers move on to cars. Yeah right, chances are that you would be safer in a two-wheeler than a one-lakh car. Call me a cynic, but I think the one-lakh is not only a pipe dream (inflation anyone?) but by the time any one-lakh car comes out Indians, or at least middle-class Indians will be moving up the value chain onto cars with Traction Control and Airbags and cars which will not be coffins on wheels. True, there will still be a lot of poor Indians for whom by 2007-08 one-lakh may not be a lot of money, but putting them in an unsafe vehicle could be construed as mass genocide by other means.
And where on earth will people park these cars? On their heads?
Anyway, if the government has to really promote car sales, they should cut the excise on sub-1000cc or sub-1200cc cars to 8% and see the market for Alto's and 800's boom (they should also then hold on to their residual holding in MUL, because such a decision would invariably send MUL's scrip into the outer reaches of the solar system). This would also benefit other car makers, and people would get proper cars instead of glorified golf-carts. And instead of utilising the revenue collection in fattening DM's and MLA's across the country, the government could begin to improve road infrastructure. Of course, the communists who have problems with the fact that roads will be used by the 'rich middle classes' will protest (why aren't the 20 odd districts in West Bengal getting their Employment Gurantee money, why roads, why airports?) , but like with the airports, the government should tell the commies to f-off.
And maybe then, there might be a point in eight or ten auto magazines.
But then again, petrol may cost Rs 100 a litre by then and everybody will be using the train here. And of course, the 1960's railway infrastructure in Mumbai could do with a spot of replacing here or there and maybe even a few hundred new coachs instead of three we have right now.
Anyway, talking of car companies, what is with Tata Motors and failing European auto companies, first MG Rover and now Fiat. Supposedly, Tata will use Fiat's network to market their cars in Europe, but with Fiat sales declining across Europe (with Renault-Nissan, Citroen, Toyota and Honda picking up sales) I doubt the benefits of such a tie-up. And what if it goes sour like the Fiat-GM relationship, will the Tata's also have to buy their way out of Fiat. I guess instead of a one-lakh car and all, Tata Motors would really be better off developing better cars for the Indian market. Auto sales have been sluggish in 2005-06 growing under five percent, but Tata Motors has actually been losing sales. maybe because people have finally begun to realise that the Indica/Indigo is a really sad little car with a pathetic engine. I really worry what will happen to Tata Motors once someone gets in credible Diesel engine competition to the Indica which Maruti plans to do in late-2006 with the Diesel Swift.
Thanks to Desipundit for highlighting my haste and ignorance for thw world to see! Shouldn't be too fast or furious next time!


Bonatellis said...

ummm, i wouldn't trust this particular author (ref. Fiat-Tata) ...

tony said...

The more "he" delays his 1 lakh car, the worse its going to get.. Is he comparing it to the Computer Chips. :-).. he should be comparing with an AutoRick

K said...

You know that a Bajaj RE 4-Stroke CNG rick costs 1.25 lakhs? While an Maruti Omni, despite excise costs Rs 1.95 for the passenger version and seats five people more than an auto. The Omni might be unsafe but its certainly a lot safer than an auto-rick.

thalassa_mikra said...

Great post K! Before the government starts promoting car ownership on a mass scale, they'd do well to take a look at Indonesia's plight, a country that saw massive growth in car ownership during its oil glory days (70s to 90s), and now is dearly paying for it. At least Indonesia has the excuse of actually possessing some oil reserves to justify the car euphoria.

And what's with our Fiat obsession? The Italians are crap at making economy cars, the luxury trade is their forte. We'd do better to tie up with the Japanese and French.

K said...

The government did tie up with Suzuki (instead of the planned tie-up with RenaulT or VW) and Maruti has been an extremely successful result. I love my lil' Alto.