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Old 17th June 2012, 20:29   #31
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Default re: Why this Kolaveri for the Indian Car Industry?!!

Originally Posted by Turbo_Charger View Post
Our Auto Sector has Petrol Lobby, Diesel Lobby, European Lobby, Japanese Lobby & Indian Lobby. All that these lobbies do is spoil the other manufacturer's efforts. That's why the Politicians are taking advantage of this and doing whatever they want. First the Auto Industry has to be united themselves and then they can take on the Government for rational pricing of fuels and taxes on cars.
Well pointed out. For every lobby there is an opposing lobby but there needs to be a point where they negotiate an equilibrium. It's not only hurting the auto industry but us customers too.
I am all for the government putting high duties on CBU's as this has boosted investments and employment in our country. However, there are certain CBU's that should be exempt such as hybrid and electric cars or atleast the duty on the electric motors etc should be negligible for the time being.
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Old 17th June 2012, 21:09   #32
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Default re: Why this Kolaveri for the Indian Car Industry?!!

See the problem according to me stems from one reason, which has to be done especially in country like India.

In India, the only thing that works is union and these unions shouting at govt only then will govt give it a thought.

Think about it, we have labour unions pushing labour agends, we have petrol retailer's union who manage to push their agenda in with the govt. Of all we also have a Auto manufacturer's union (SIAM) which is a mode for voicing its opinion

But unfortunately, there is no car owner's union, imagine having a car owner union at State / National level who can gather all points and lobby with govt. Here are some advantages:
- Fighting with central govt for fuel price levels etc
- Fighting with State govt on road maintenance issues.
- Manufacturer union (e.g. Maruti vehicle Owner's association) pushing for agenda issues against manufacturers.

This would change the paradigm, and push agenda with govt.

I am planning to make a separate thread on this to explain my point better.
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Old 18th June 2012, 00:44   #33
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Default re: Why this Kolaveri for the Indian Car Industry?!!

Diesel car or petrol cars, well both rely on resources that India lacks. The policy pricing can not be controlled on Petrol because we just simply can't control it and political dynamics will not allow a Diesel policy that is market driven.

What the govt. needs to do it put India on the R&D leadership in cars with sustainable energy. That needs a very long term policy direction, investment and vision. We have lost the automotive R&D curve for P and D cars. The future is neither of these. We get imported technology (right from the ball bearing to engine, we might manufacture them here, but we do not hold any patents, full stop!). India has the ability and need to innovate on the technologies of the future. That is where the money is and that is what will generate next gen economics.
Imagine a world tomorrow where the next gen cars run on fuel/technologies that are begin churned out of India! Well, seems distant, but then that is what the govt is for : creating policies, setting the environment for very long term future goals.
Now coming out Alice's wonderland, do not expect this vision from any near term (or even long term?) Govts that might come up in Delhi. Is not just sad, but also a shame!

We lack leadership,we have bad managers.

Say, why not provide the so called subsidy on Hybrid cars? If the Prius would cost 15L OTR would there be no market for it? I would buy one! I would get the economics of the capital investment of a petrol car,but the run-time fuel economics of a diesel car!

Oh but then our netas need to free time from discussing on 60 old cartoons!
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Old 18th June 2012, 06:54   #34
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Default re: Why this Kolaveri for the Indian Car Industry?!!

On one end you have the auto industry not doing well leading to job cuts, reduced investments, et all. At the other end you have problems with our infrastructure not coping up with auto sales, lack of parking space, pollution, etc. Fuel pricing is another big issue, none of our policy makers want to deregulate Diesel and price it at market rates.
And you have all these different lobbies each trying to take advantage of one or other situation by trying to influence policy making in a way that will benefit them. An example would be a complete wipe-out of the petrol car industry (I guess we're trending in that direction already).
This leaves us the consumers/owners/buyers of the cars in a situation where no one cares for what we want though we're the ones who pay for the automobiles, can it get worser ?
I wonder if there is some middle ground that can be covered here in such a way that we do not skew things in one direction - but then I'm not an economist so just dream and hope for the best !
@GTO - thoughtful, catchy thread title there !

Last edited by NPV : 18th June 2012 at 06:58.
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Old 18th June 2012, 11:21   #35
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Default re: Why this Kolaveri for the Indian Car Industry?!!

Fantastic discussion forum - I would like to add a few points here:

1. The Delhi Govt. in any case has a differential registration cost for Diesel vehicles. Above 10 lac cars are taxed 12.5% instead of 10%. Isn't this a clear case of double taxation?

2. By their own admission, the diesel consumption by passenger vehicles is 15%. Another statistic I read stated only 0.6% consumption is by private vehicles. What about going deeper into the same and separating the amount of diesel the various indicas / innovas / indigos consume for ferrying techies / other offices offering transport. These vehicles run close to 60,000-100,000 km a year! And they are quite a few to ignore

3. The Govt. has recently woken up to crazy solutions to mop up tax revenues for their fiscal deficit. I know of tax raids increasing and the tax-man actually letting people know that they have a 'target' to ensure better collections and hence are slapping assessments left right and center!

A brief Economics 101 class for all:
Hypothetically, the diesel tax on cars assuming 25% of all cars sold as diesel = 500,000 cars x Rs. 150,000 taxes which will raise a total revenue for the Govt. = Rs. 7,500 Crores. This is assuming there will be no fall in demand which itself is false. Further, this money is going to reduce disposable income from households which would otherwise have been spent on investment (assuming India's investment rate at ~ 30%, this would be in excess of Rs. 2,000 Crores of investment / capital formation foregone). Also, as per statistics from MOSPI (Ministry of statistics and programme implementation), the consumption of HSD (diesel) was approx. 57 million tonnes in 2009-10. Adding additional demand for 2 years at an annual growth of 10%, this figure touches approx. 70 million tonnes. If we were to simply increase the price of diesel by Rs. 1 per liter, the Govt would earn the entire revenue forecasted from this so called diesel tax. That is a 2% increase in cost of diesel rather than a 10-20% cost of increase of passenger diesel vehicles.

This is my analysis and could be wrong. Please forgive if this is too simplistic.
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Old 18th June 2012, 12:05   #36
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Exclamation re: Why this Kolaveri for the Indian Car Industry?!!

Some views from the other side of the spectrum:
On auto Industry:
- Manufacturing - Excepting very few companies, core components are imported from abroad (parent) companies. (I was told that even Maruti imports transmission systems from its parent in Japan at an exorbitant price, pl correct me if wrong). --> Forex spent --> Increased import/export parity.
- Vehicle Running - 80 (or more) % of oil is imported abroad --> Forex spent --> Increased import/export parity.
- Increased employment - While auto industry does create employment, no clear estimates on the employment levels due to personal vehicles.(Commercial vehicles are part of every business, they need not be discussed as they cant be discussed in isolation from the businesses themselves).

On the diesel consumption figures:
- it is not the matter of how much do the personal vehicles consume.
- Can we allow a 2% slip on tax revenues, by "design"? (No comparisons to how much is looted on implementation!).
- While the diesel consumption figures are less today, Leaving this anomaly untouched would only make it aggravated.

From diesel pricing view: What is wrong in taxing a fuel lesser so the fuel can be associated with specific segments? (How to differentiate furnace oil to diesel is another topic!).

Finally, even if we assume that diesel for personal vehicles is indeed a fine policy from political perspective, what is wrong in asking the people to part with some of their savings arising due to (fuel) taxing differences to the Govt.?

(Enough of args, time to get slammed? ).

Last edited by babu.sundaram : 18th June 2012 at 12:07. Reason: Some formatting
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Old 18th June 2012, 12:18   #37
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Default re: Why this Kolaveri for the Indian Car Industry?!!

I have a very brief rant -

Our country, our politicians, our industry, our people lack the COMMON SENSE that is needed to build WIN WIN situations for all.

We work in a scarcity syndrome where I need to take away stuff before anybody else takes it. Nothing good comes out of it.

Till this situation changes - Maybe another 200 years for us to become a egalitarian, surplus, rules following society and country - expect all kinds of nonsensical rules and decisions led by dinosaurs like MMS (Manmohan, Mamata and Sonia) and their ilk.

Emigrate if you have a chance.

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Old 18th June 2012, 12:34   #38
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Default re: Why this Kolaveri for the Indian Car Industry?!!

The kolaveri di is not limited to the auto industry alone. Look at all the policy flip flops, pricing, taxation and scams that have taken the wind out of the telecom industry. And that is an industry where India is the global no. 2 in terms of subscribers - a bona fide worldwide success story. If they can do that to telecom, which is regarded as an aam aadmi service, imagine what the govt thinks of cars, which are a "luxury."
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Old 18th June 2012, 14:30   #39
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Default Re: Why this Kolaveri for the Indian Car Industry?!!

Another factor that we have to look at is, whether the Government is offering any subsidy for the more fuel efficient and environment friendly vehicles. Also, I feel that Government and our Automobile manufacturers need to promote the hybrid/ alternate fuel models.
Then comes another issue. Most of our hybrid vehicles either use Electricity as an alternate fuel. (Other than those vehicles which have a engine stop function when idling for a period of time). This electricity is still produced in the traditional hydro-electric projects or thermal energy projects and both these are not “current” technologies.
Government is trying to set up atomic energy based electricity production which is cheaper. This move is heavily opposed by local population (where the project is set up, reason being fear) and will probably take a few more years.
Till then "why this kolaveri di"
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Old 18th June 2012, 15:27   #40
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Default Re: Why this Kolaveri for the Indian Car Industry?!!

India began its liberalisation program in 1991-92 when the balance of payment crisis got too much to handle. Wiki informs me that the new neo-liberal policies included opening for international trade and investment, deregulation, initiation of privatization, tax reforms, and inflation-controlling measures. Twenty years down, we seem to have come full circle. There seems to be no coherent or structured economic plan in place. Cheap populism scores over sound financial judgement. We take on a Vodafone and threaten retrospective taxation without a thought about the impact on further investment. We play with the price of fuel, skew the buying dynamics towards diesels wilfully and then in one fell swoop, change the entire paradigm by threatening to price diesel cars way above what most people can reasonably afford.

As a petrol owner I am unhappy that I pay through my nose to run my vehicle. But I would be even more unhappy if the Govt does in fact implement the diesel vehicle tax. At a very fundamental level there is something wrong with it. A car purchase is a careful decision and the finances for it are planned over the long term. Capricious and short-sighted policy changes that change the entire dynamic of the car ownership experience are not helpful. Petrol costs nearly TWICE today than it did barely 3 years ago, diesel costs nearly the same- how is someone to plan their expenses if it is subject to such fluctuations? Also you can't right a wrong with another wrong: raising diesel vehicle prices is no solution!

Even worse, what sort of signal are we sending to the companies betting big on India as a market? To investors and countries keen to do trade with us? That we are a short-sighted, opportunistic people who are happy to grab their money and won't weep much if they leave? That's what is going to happen!

The supreme irony is that the architect of that liberalisation, which showed so much promise in its initial years, was none other than the person occupying the PM's chair today. The current FM is more busy planning his retirement sinecure that focusing on the job at hand.

As usual it is the middle-to-upper-class Indian who is the soft target.

Last edited by noopster : 18th June 2012 at 15:28.
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Old 18th June 2012, 15:40   #41
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Default Re: Why this Kolaveri for the Indian Car Industry?!!

I think the architect of 1991 reforms was forced to do so by IMF/world bank. Now we have become important enough that they cant make us do it and we have no intentions of doing something on our own.

Thats OT. But coming to cars, how important is the industry itself to our country? In terms of jobs, economy etc. when compared to other countries like the U.S.

Last edited by srishiva : 18th June 2012 at 15:41.
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Old 18th June 2012, 20:20   #42
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Default Re: Why this Kolaveri for the Indian Car Industry?!!

Originally Posted by 46TheDoctor View Post
Hello GTO, Nice write up!
But, even though i feel sympathy for auto industry in india, i sincerely feel that increasing car penetration levels is not a good option for us because:
1. Ours is nation of more than a billion people and our infrastrure is clearly not suitable for higher ratio of no. of cars/ population.
2. Just look at the development of our residential as well as our public areas. There is not enough space for parking as well as vehicular movement on streets even with current ratio. Just imagine 25-35 times the current traffic on our roads and also the amount of polution
3. So to accomodate that kind of personal vehicular concentration in our conditions we need to entirely revise our public infrastucture as well as building by laws to reduce population density in our cities which is just not possible now as we are at the point of no return.
4. So, the only solution for us looks to be the improvement of public transport to the levels of developed nations and definitely not the increase in car penetration levels.
So to conclude, it is definitely disappointing for us petrolheads for not being able to buy our dream machines at reasonable prices, but in a larger picture i feel good that personal vehicle sales are going down because it cant be a transport solution for country of more than billion people especially with the unplanned infratructure like ours. As far as the employment is concerned it can be generated through other sectors as well.
I would like to know opinions of fellow bhpians on this.
Very Well said. As far as Industry's concern, they should better learn how to keep making profits on stable set of volume as in "Market Size" (as Mr Boneham points out) rather than ever increasing set of volume as in "Growth".
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Old 18th June 2012, 23:33   #43
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Default Re: Why this Kolaveri for the Indian Car Industry?!!

Growth is essential to lift the large portion of our population out of poverty and provide a decent life, we have learned to live with a ridiculous amount of folks living on 30 rupees a day and all the attendant problems. Ignoring it won't make it go away.

The only way this will happen is by more consumption domestically or exports. I don't think its fair for the 5% of us who are well off and can afford life's niceties to now talk about infrastructure. 10 million more cars means millions of jobs which we need, folks who will now earn and consume and this is how an economy grows, one person buying 10 cars doesn't help anyone.

Of course we need sustainable growth and here is where we are completely let down by extremely poor governance, unimaginable levels of corruption, unimaginative business - where are the electric autos, cars? - which makes every policy meaningless as we can't implement it.

What is stopping us from having well planned cities with proper infrastructure, public transportation, and all the other things we see in the west? The fact that we are a billion plus makes it even more critical. Its certainly not money but the will to do things properly, our administration and politicians are mixed up with various lobbies and this reflects in the poor state of our cities with all the haphazard business areas, housing societies, hospitals, hotels, schools, malls which completely go against basic infrastructure and traffic planning thanks entirely to political connections and graft. Its not that we don't have brains.

We find ourselves here with some growth and at least 5% in a position to consume thanks entirely to the IT and BPO boom from early 90s with folks finally earning enough to consume which has driven growth in all other sectors from housing, auto, banking, mobile, retail, TV etc. But that's not going to be enough, what the next growth impetus?

Last edited by raul : 18th June 2012 at 23:44.
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Old 19th June 2012, 09:27   #44
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Default Re: Why this Kolaveri for the Indian Car Industry?!!

It is a fact that diesel is subsidized and therefore in a sense someones' tax is paying for another's luxury. I am of the view of slab based taxation for diesel cars is a solution based on ex-showroom prices. You could spare the less fancy ones like the Indica, Punto, Swift etc that fall on the lower bracket mostly driven by the "most affected" section. Or it could be based on engine capacity. The point is, someone who is a ecologically and economically sensitive should benefit more than a gas guzzler.

One benefit of putting pressure on the manufacturers is that only then would there be innovation. Manufacturers would be forced to put more research into making the vehicle lesser in weight, even more fuel efficient , localization of parts etc. Take the mobile industry as a perfect example. Remember that a Nokia 3310 used to cost upward 10K and now you get a touch screen smartphone for 1/3rd the cost. This was purely due to manufacturers putting in heart and soul to adapt quickly or die off - read Nokia.

And speaking about mobiles - Did you know that the mobile tower business in India is one of the largest consumers of subsidized diesel ? Last heard they consume 2 billion litres of diesel every year ! Do they have alternate solution - Maybe by using solar panels, but they dont since the initial capital is high. So the next target is potentially the tower business.
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Old 19th June 2012, 13:10   #45
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Default Re: Why this Kolaveri for the Indian Car Industry?!!

I think India is increasingly becoming "rudderless" and it's policies are more 'knee jerk' reactions, so are it's policies related to the auto industry, probably driven by the jealousy of a minister seeing 'the rich and famous' with their diesel driven SUV's.
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