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Does the sub-4 meter rule for cars in India still make sense

19th March 2024, 14:40 by Utkarsh Chaudhary

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One of its pros is that it keeps the Indian car companies competitive but is it creating value in today's time?

BHPian 1.2TSI7DSG recently shared this with other enthusiasts.

You can read the history of this rule in this relevant thread.

Million Dollar question - Is it still relevant?

Pros:

Keeps the Indian manufacturers competitive as most of the global platforms are now 4.2 m (eg - Polo/Ecosport etc)
Forces us to push for more power from smaller engines (1.0L engines that made 50 HP are now touching 90-100 HP, Diesels like 1.4 on 54HP Indica is now a 1.5 on the Nexon with 110? HP today)

Now the same pros are cons for a petrolhead community like us. No access to big engines on small cars/no globally competent cars etc.

Also, the recent threads on the dying small car segment make me question the validity of the rule today.

It is still creating value?
Are we willing to pay higher for a 4.2 m car?
Are we willing to pay higher for a 1.4 petrol engine in the small car segment?
Does the lower duty actually make you buy a car that fits the size over something that doesn't?

So what would you do?

Here's what GTO had to say about the matter:

Don't underestimate the power of sub-4 meter cars and how the lower taxes affect pricing. Case in point = In October 2023, sub-4 meter cars accounted for around 2.5 lakh sales & it's a similar story in most months!

Here's what BHPian V.Narayan had to say about the matter:

An excellent and controversial subject for a healthy debate.
IMHO the sub 4-metre rule remains completely relevant to India and shall become more so as our car numbers increase. In order to accommodate a larger number of cars for our growing middle and lower middle class we need the 4-metre rule and I dare say a sub-3.6-metre rule too.
I always thought that given our historically narrow city roads and dearth of parking maybe we should have had 4 tax segments – (i) below 3.6m, (ii) 3.6 to 4.0, (iii) above 4.0m and a ban above 4.5m. Cars above 4.5 metres in length ought to be not allowed in India. Plus a punitive rate on engine size above 1.5 litres. We have lost perspective on what engine bhp is needed to lug a family of four around at between 20 to 80 kmph - that's the speed range most cars stay in for over 90% of their running time I guess - a few long-run enthusiasts may differ.
Look at cars in the 1950s to 1970s in Europe and you'll find engine outputs of between 40 bhp to 70 bhp region. We now think we need 1500cc, 2000cc and 2500cc engines which mainly appeal to the ego and the sense of power. I think what GoI did is right. I only regret they didn't do more.
The sub- 4 metre car and associated tax benefits will remain a part of our landscape for several reasons:
The market needs more affordable small cars to address the aspirations of the lower middle class moving up.
Our road infrastructure in our crowded old city areas cannot cope with 5-metre cars or even 4.5-metre cars; the same for our parking availability. And given that we are the most densely populated large country this fact isn’t changing for another century though better roads and planning will help but cannot alleviate the issue.
Smaller cars = smaller engines = lesser fuel burn = lower oil imports. The delta that a few million small cars contribute to Forex savings might be limited but every step counts.
I realize my pro-Govt views on sub- 4 metre cars fly against the winds of opinion that blow at Team BHP.
D-BHPian @pqr who writes some of the best and most in-depth threads has one on this subject.

Here's what BHPian Hayek had to say about the matter:

The sub 4 meter rule was a function of lobbying by a certain leading automaker, which wanted to retain its leadership position in India in the face of new foreign entrants and sought to obtain a tax advantage to do so. The only other country which has a similar rule is Japan, with its regulation on Kei cars.
Everywhere else, people have realised that differential taxation rates based on the size of the vehicle are meaningless. People argue about parking space, but most parking slots are of a standard size and width, and a 3995 mm long car which is 1795 mm wide occupies the slot as much as a 4710 mm car which is 1850 mm wide (comparing a Brezza and Allspace). Even on roads, we are more often constrained for width, not length.
What other countries have is differential taxation based on emission levels or fuel economy. Once again, forcing people to make small engines does not necessarily make sense - in the ICE world, a Camry Hybrid probably gives a better fuel efficiency than the 1.2 l petrols in many cars. And there should be a value for lower particulate emissions as well given the pollution levels in our city.
So I think it is time the government abandons this stupid sub 4 m rule which forces people into less safe India-specific cars instead of larger and safer cars. But yes, GST concessions for zero-emission vehicles and penalising vehicles with high carbon and particulate emissions through higher taxation makes sense.

Here's what BHPian libranof1987 had to say about the matter:

How has the sub-4m rule really helped the automotive industry, or the consumers in any way?! The argument that this rule allowed better affordability through lower taxes, actually also means that cars that aren't eligible for it have way higher taxes! If the vehicles that qualified under this rule had 0 taxes, sure, tout the rule all around.
What is so scientific about this rule anyway? Why 4m? Why 1.2 or 1.5 for engine capacity? All these parameters are so arbitrary!
Given the buying demographic for the sub 10 lakh category, they'd buy 800cc and 3m if they had even lower taxes = prices. We are a very price-sensitive market so people would buy the cheaper option, regardless of the engine capacity or length. The companies that manage to have their way with on Govt. policy could lobby for whatever suits them. We know what's been happening with other important things: be it a/c cabins for commercial vehicles, or airbags being compulsory on cars.
Worse, none of the other infrastructure is built around / to support such laws. So, it makes 0 difference on the road.
Let's be honest: these randomly put-together laws, far from doing anyone any favours, have actually deprived the Indian buying public of cars of comparable quality and capability w.r.t. developed markets.

Here's what BHPian IshaanIan had to say about the matter:

I believe India is a prime market for introducing Japanese Kei car rules in; sub 3.4M cars with small 660cc engines limited to 64hp. This will drastically improve the quality of products available over that bracket and truly free up space on the roads since at the end of the day a learner in a sub-4m car impedes as much traffic flow as a more experienced guy in a Range Rover. I am not sure why our regulators haven’t fancied implementing the Kei Car restrictions here.

Here's what BHPian bijims had to say about the matter:

If you look at the top 25 best-selling cars for February 2024, you can make out that small sub-4 metre cars still rule the market, with over 15 of the top 25 belonging to the sub-4 metre segment. Indian manufacturers also try their best to make them fit under the lower tax slab by opting for sub-1.2-litre petrol engines/sub-1.5-litre Diesel engines and other criteria as well.
As you can see in the chart above, cars like Baleno, Fronx, Sonet and Venue which are all sold with 1.5-litre petrol engines abroad are offered with 1.2 litre naturally aspirated or 1.0-litre turbo petrol engines here, just to get the benefit of the lower tax slabs. Moreover, the Venue is just over 4 metres abroad at 4040 mm and the Sonet at 4120 mm, they have been redesigned to fit under 4 metres as well.
The tax benefit makes a huge difference as otherwise these cars would be priced too close to their larger counterparts, in the current scenario itself there is a huge overlap, if not for the favourable tax slab, this would have been worse and it wouldn't have made much sense for these sub-4-metre cars.
So to keep prices and sizes of cars in check (due to the increasing traffic and large number of cars on the road), the sub-4-metre rule is as relevant today as it was when it was first introduced.