Car­mak­ers be­moan flip-flop­ping In­dia

Bangkok Post - - WORLD - ADITI SHAH

Af­ter 18 months of sud­den rule changes that left many car­mak­ers scram­bling, some of the in­dus­try’s largest play­ers are call­ing on the In­dian gov­ern­ment to set clear, sta­ble poli­cies — or face the risk of de­lays to ma­jor in­vest­ment.

In­dia is one of the world’s fastest-grow­ing car mar­kets, and get­ting more com­pa­nies to man­u­fac­ture in In­dia — both for its own mar­ket and for ex­port — is crit­i­cal for the Prime Min­is­ter Naren­dra Modi’s gov­ern­ment, which needs to cre­ate mil­lions of new jobs each year as the work­force ex­pands.

Ex­ec­u­tives at au­tomak­ers like Volkswagen, Hyundai Mo­tor Co and Tata Mo­tors say that to in­vest more and bet­ter, they need more sta­ble reg­u­la­tion on tax, emis­sions al­lowances and elec­tric ve­hi­cles.

The lat­est set­back came last week, when In­dia’s cabi­net ap­proved a move to in­crease the max­i­mum levy on luxury cars and sport util­ity ve­hi­cles (SUVs) to as much as 25% — less than two months af­ter de­cid­ing on a lower rate of 15% as part of the new na­tion­wide goods and ser­vices tax.

“The en­tire auto in­dus­try got hit by this sur­prise,” said Guenter Butschek, man­ag­ing di­rec­tor at Tata Mo­tors, which owns the Bri­tish luxury car brand Jaguar Land Rover.

“I don’t play with un­lim­ited re­sources. We need a roadmap at a much ear­lier stage to make sure we al­lo­cate our re­sources in a proper way,” said Butschek.

He said the com­pany is wait­ing for clar­ity on the elec­tric ve­hi­cles pol­icy be­fore it de­cides on any prod­ucts and strat­egy.

Other changes that have caught car­mak­ers by sur­prise in­clude a tem­po­rary court ban on the sale of large diesel cars in New Delhi last year and a tax in­crease for hy­brid cars from July, as the gov­ern­ment fo­cuses on elec­tric ve­hi­cles.

Hyundai, as a re­sult, has dropped its plan to launch hy­brid cars in In­dia and will now look at bring­ing in elec­tric cars.

“Any pol­icy that has to be made has to be pre­dic­tive, con­tin­u­ous and con­sis­tent,” said Rakesh Sri­vas­tava, the com­pany’s di­rec­tor of sales and mar­ket­ing.

Volkswagen said it was com­mit­ted to In­dia but also de­manded a re­li­able frame­work to set its long-term strat­egy.

“Fre­quent pol­icy changes could pose a big hur­dle for auto man­u­fac­tur­ers to de­cide on their long-term strate­gies,” said An­dreas Lauer­mann, man­ag­ing di­rec­tor of Volkswagen In­dia. “This is some­thing that af­fected us in the past too.”

The changes are ex­pected to dampen growth, an­a­lysts say. Con­sul­tant IHS Markit low­ered its 2018 fore­cast for do­mes­tic car sales growth in In­dia to 11% from 13%, and by 0.5-0.2 per­cent­age points for sub­se­quent years up to 2024.

“There is too much volatil­ity in the sys­tem,” said Puneet Gupta, South Asia man­ager at IHS, adding that this could hurt Modi’s “Make in In­dia” cam­paign if au­tomak­ers turn to more sta­ble mar­kets.

Growth in car and SUV sales slowed to about 7% in the first four months of the cur­rent fis­cal year that started on April 1 com­pared with 9%t growth over the same pe­riod last year, in­dus­try data showed.

De­spite this In­dia is on track to be­come the world’s third-largest car mar­ket by 2020, said Gupta.

Tata’s man­ag­ing di­rec­tor Guenter Butschek speaks dur­ing the launch of Hexa car in Mum­bai. The man­ag­ing di­rec­tor said In­dia’s cabi­net approval to raise the max­i­mum levy on luxury cars and SUVs caught the in­dus­try by sur­prise.

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