Why this Kolaveri for the Indian Car Industry?!!

[GTO]

NOTE : This thread is to discuss the inconsistent policy making & Center's lack of support to the Indian Auto Industry. A dedicated thread on the proposed diesel car tax can be found at this link (Govt plans to impose additional levies on diesel cars).

The Indian Automotive Industry defied global trends until last year, recording whopping growth at the same time that other markets were down. Still, car penetration levels in India remain at a pitiful level of <20 per 1,000 Indians. The same for developed nations is between 500 - 700 per 1,000 citizens.

A household with a car enjoys superior quality of life than one without. Just when we thought car penetration levels will improve, the Government's apathy for the sector rears its ugly head.

The Auto Industry contributes significantly to:

• The country's GDP and overall industrial strength
• Employment to lakhs of Indians (directly & indirectly)
• Tax collection to the tune of billions of Rupees (directly & indirectly)
• Foreign Exchange Earnings
• Providing a means of transportation in a country with pathetic public transport infrastructure
• Getting new technology & research facilities to India

The Indian Auto Industry's turnover is 25 times smaller than the American (Source), yet contributes 1/6th of the US Auto Industry in taxes.

April & May 2012 have seen an absolute bloodbath in the Industry. Let's take a look at the unfortunate developments of the recent past:

• Petrol prices hiked by Rs. 7.5 / liter in May! It's hard to believe that the now-precious fuel cost only Rs. 44.55 (Mumbai) in January 2009
• The Government increased excise duties on all cars in Budget 2012
• The Rupee hits a record low of Rs. 56.52 to the US$, thereby increasing import costs for manufacturers
• It was officially announced that India's annual GDP growth has slowed down to a 9-year low of 6.5%. This isn't the best time to buy big ticket items like cars

To top it off, Delhi is said to be considering a hefty tax on all diesel vehicles. The expected outcome:

• Sales levels, already suffering, will further crash. There will be a severe fall in the demand of diesel cars
• Investment activity will slim down. Overall Industrial activity will reduce too
• As the industry copes with excess capacity, job creation in the sector (and security of existing jobs) will nosedive
• Foreign car makers who were considering an India entry will look at other parts of the BRIC instead
• Inventory levels have already reached their highest level in May 2012 (150,000 cars across the brands)
• India will be perceived as an unstable, unfriendly economy by MNCs
• Car penetration levels won't improve from their dismally low levels

If the Government thinks hefty taxation on diesel cars will lead to market recovery for petrols, it is grossly mistaken. Petrol cars aren't going anywhere too soon, what with the fuel costing Rs. 75 / Liter.

Dr. Goenka, President - Automotive, Mahindra & Mahindra, had this to say:

The primary point that we have made is that overall consumption of diesel fuel for private diesel vehicle use is less than 2%. That's proven without any doubt. Therefore, the whole argument that by doing so we are somehow taking care of the loss due to diesel fuel subsidy doesn't hold water....

It's going to be a difficult year for auto industry. 2011 was not best of the year that we have had and 2012 also appears to be a difficult year.

We are of the view that the government should raise diesel prices to market-based pricing, encourage replacement of petrol by diesel and there by save on oil import bill.

If there is any tax that comes on diesel vehicles, it will not move demand from diesel to petrol, but it will slow down the industry which has already had a difficult year in 2011.

We may slow down some investments we had planned on the basis of certain assumptions.

Michael Boneham - President & MD of Ford India - had this to share:

Long-term investment decisions are predicated on and require stable government policies. Short-term, reactionary decisions are not conducive to growth in any industry, especially the automotive industry which generates significant employment and economic impact.

If an additional tax on diesel cars is imposed it will make it harder for all automakers to justify future investments and, thus, employment generation. We believe in India, and we are proud to be a good corporate citizen making major investments at this time.

However, policies like the diesel tax do not make it easy for us to remain optimistic about the overall business environment in India.

To such an important industry, is the Government supposed to provide stimulus or deterrence?

[sidindica]

The timing of this thread couldnt be any better. Here, there, everywhere, business is down. Taxation is flawed. The GOI has absolutely zero vision for the auto industry and is full of confused minds in the name o taxes after taxes. They just want their booty to increase so that the corruption levels remain high as ever and we, the middle class, bear the brunt. Where are all the taxes going? In the name of road infrastructure? Obviously, its a joke. And so the current policies which is already putting the entire industry in the doldrums.

Can anyone believe that a diesel hatchback like the i20 asta and the punto sport 90 cost upwards of 8,50,000 OTR Delhi?

[petroguzzler]

The policies are deterrent to the car industry. I think the logic is to increase prices of vehicles(petrol and diesel) and reduce the demand for cars in general, thereby reducing consumption of crude oil and paving way for a positive balance of trade which consequentially will strengthen the rupee.

If the government is hellbent on taxing diesel cars and pricing petrol insanely, they should at least lift the stratospheric taxes on cars like Reva, Prius(I hate em) etc..

[theMAG]

This is part of a larger problem highlighted by all major industrialists: policy paralyses. This government has no capability to administer what is right for the country. Consequently, it is the nation's industries that suffer first since they are the high-visibility targets.

[46TheDoctor]

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.

[S@ndy]

Yes, As Sidindica said, The timing of this thread couldn't have been better. The Government is imposing more and more taxes just due to their greed and to fill their treasury. Government has no concern for the Auto Industry in India and as GTO said 'India will be perceived as an unstable, unfriendly economy by MNCs'. The various companies will surely turn away heads from entering!

The prices of diesel vehicles are high but their cost of running is low i.e. Rs 44 per litre and OTOH The prices of petrol vehicles are comparatively lower but their cost of running leads to a deep dent in pockets i.e. Rs 75 per litre. One or the other way, our Vitamin M is at a serious risk!

[honeybee]

The government is running out of money and so such ridiculous measures. It's been clear for a few years now that the PM is unable to control or direct anything that goes on in the government, be it the CWG scam or the 2G scam or the retrospective taxes or the diesel pricing and subsidies.

No wonder Mr. Premji opined we are without a leader.

46TheDoctor,
The government needs to decide if it wants to be socialist or capitalist. It cannot on one hand promote automobile companies and then on the other make running those automobiles impossible.

And if at all the government wants to curb use of private vehicles, it needs to strengthen the core infrastructure and ensure the public transport is made efficient. People are buying cars not just to flaunt their upward mobility, but more as a way of improving the quality of commute they undertake every day. Back when I was a college student I used to ride trains where you could get decent standing space in mornings. Today the definition of rush hour has to be redefined, as even at midnight you see people jostling for space in the trains. And where the improvements in the train service quality? Mind you, till date the railways haven't even been able to get their public address systems working properly.

[carboy]

Originally Posted by 46TheDoctor

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.

Are you willing to sell your car(s) and not buy one till such time the infrastructure improves?

[samarjitdhar]

Very relevant thoughts. Some of the key reasons the government is now at the brink of implosion is because of unfunded subsidies, a minuscule tax umbrella, rampant corruption and a total lack of long term visionaries to lead the country. As a result they look for red herrings such as this as retrogressive taxes on cars which have now become an essential part of our lives compared to a luxury say 20 years ago. Public infrastructure in most parts of India except for say 2/3 cities remain in shambles. Even in a city like Mumbai, millions have to travel like sardines day in and out in the local train system. Lord knows when a proper underground subway would be completed. Same goes for other cities like Bangalore, Chennai, Kolkata. In fact in my organization a guy based in Bangalore refused to take up a project because the location of the project would make his commute 45 kms one way. Either he has to rely on his petrol car or use non-existent public transport. How does that affect productivity? Aren't we losing more business this way? I am just afraid that the beginning of the end of Incredible India has commenced .

While I will keep this rant small with respect to how much of our taxes is being siphoned or wasted through grand sounding schemes, with the budget deficit now dangerously kissing 1991 levels, tax collection simply has to be improved. A proper taxation system has to be in place such that more capable citizens who can pay, pay their fair share of taxes to ensure basic amenities are in place which includes public transportation infrastructure. As a parting shot, guess how much taxes this farmer pays Farmer splurges Rs 17 lakh on car registration number - The Times of India who just bought his ninth car, a Landcruiser .

[ijeet]

Originally Posted by 46TheDoctor

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.

Whoa I am use to seing these kind of comments in gun forums where somebody will come and advice against buying guns for various reasons. never thought I will rad something like this here.

46TheDoctor: We pay enough taxes to bring and drive our cars on roads (Specially in bangalore). What government need to do it fixes its corrupt management. Every tom dick and harry government officer is woth crores nowdays, simple IAS has hundreds of crores (Remeber IAS couple from MP). People who are swindling thousands of crores from people of this country are being touted as CM's. Government needs to plug its holes and needs to do that fast.

Who is stopping govenment from improving public infrastructure. I see overloaded buses daily, why that money is not beign used corectly.

And who is resonsible for unplanned infrastructure in first place, me as a citizen or gov which controls everything?

[download2live]

We are going through a phase which USA went through during the second term of Bush.
Till 2014, stop watching, listening or reading News. Otherwise you will get high BP and some other disease. Just do your work and tell yourself that the mess around you is the punishment for not voting(at least for me).

I have no other explanation for this.

And its not the car industry alone which is suffering.
The whole of India is burning while the Madam makes the Stooge dance.
What a shame.

[Vid6639]

I had mentioned this in the other diesel thread as well. Here we are worried what will happen when diesel cars begin to cost much more but imagine the plight of the industry itself.

With the govt dilly dallying like this no car manufacturer can firm up long term plans for india. In this years budget everyone was waiting for the additional tax on diesel cars. Once that was not announced and only a small % across all cars was announced the industry heaved a small sigh of relief as they could now concentrate on diesel cars and start making investment towards diesel engines.

Within 2 months of the budget the government is at it again, contemplating increase in diesel cars all over again. Manufacturers have no choice but to hold off again and wait it out.

Not only is the customer suffering with high fuel prices, higher insurance, higher interest rates and higher cost of cars but the manufacturers themselves are suffering.

[ninjatalli]

Originally Posted by 46TheDoctor

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I would like to know opinions of fellow bhpians on this.

+ 1 to this.

Excellent thoughts. We also need to spare a thought to the environment, maybe not from an individual perspective, but atleast from a government perspective. That's one silver lining I can visualize with respect to the current situation, however I doubt if that's really being thought about by the officials.

Originally Posted by honeybee

46TheDoctor,
The government needs to decide if it wants to be socialist or capitalist. It cannot on one hand promote automobile companies and then on the other make running those automobiles impossible.

And if at all the government wants to curb use of private vehicles, it needs to strengthen the core infrastructure and ensure the public transport is made efficient. People are buying cars not just to flaunt their upward mobility, but more as a way of improving the quality of commute they undertake every day. Back when I was a college student I used to ride trains where you could get decent standing space in mornings. Today the definition of rush hour has to be redefined, as even at midnight you see people jostling for space in the trains. And where the improvements in the train service quality? Mind you, till date the railways haven't even been able to get their public address systems working properly.

I believe that's exactly what the Dr is trying to clarify. The issue can't be resolved by one specific organization (like railways). It runs deeper, and has to be pushed from the top. Although I doubt it, but on a optimistic view, I do hope there is some plan to improve the public infrastructure in line with the points raised by GTO.

Originally Posted by carboy

Are you willing to sell your car(s) and not buy one till such time the infrastructure improves?

No, but he'll surely choose to use the public transport if it does improve. Do read his post again to understand his point.

One example is the bus transport options available between Pune & Mumbai (both public & private options). Unless I have a need for the car in Mumbai, I prefer to use Shivneri at all times. But I don't see such options across the country or for within city travel. For instance, it's a pain to use Pune bus services.

[carboy]

Originally Posted by ninjatalli

No, but he'll surely choose to use the public transport if it does improve.

What about people who do not have a car & want to buy one?

Originally Posted by ninjatalli

Do read his post again to understand his point.

I thought that his point was that it's OK for the govt to not have auto-industry friendly policies till the time the infrastructure improves - or did you get something else from it?

This is the same as those people who felt that the Nano should be banned till such time infrastructure is improved because it will increase congestion on the roads (this was before the Nano released - when people thought it will sell more than the Alto).

Originally Posted by ninjatalli

One example is the bus transport options available between Pune & Mumbai (both public & private options). Unless I have a need for the car in Mumbai, I prefer to use Shivneri at all times. But I don't see such options across the country or for within city travel. For instance, it's a pain to use Pune bus services.

Frankly, the reason I bought a car in the first place to do Pune/Mumbai trips every alternate weekend. I tried Shivneri, private buses (Neeta etc) and the train for 3 months before I got sick of it and bought a car - probably the best decision of my life as far as Bombay-Pune trips are concerned. The amount of time and headache saved is unbelievable. Anyway, I don't do Bombay-Pune trips anymore.

[svsantosh]

Who can comment with FACTS about Chinese car scene wrt to the Govt and its policies? Is it true (IIRC) there are more than 500 car makers? Is it encouragement and red carpet for innovators there viz-a-viz in our country?