RC Bhargava, Chairman, Maruti Suzuki India said putting NCAP standards into cars in India will have no significant impact on the number of accidents on Indian roads. The octogenarian – Bhargava is 88-years-old – was addressing the media at a year-end meet hosted by the leading Indian carmaker with its senior management team, including Hisashi Takeuchi, MD & CEO, Maruti Suzuki India.
The statement came in response to a question surrounding the recent Global NCAP tests that scored three Maruti products – Swift, Ignis and S-Presso – a rather poor 1-star rating for both adult and child occupant protection.
For the record, Maruti has always maintained its products meet all safety regulations laid out by the Indian authorities. Bhargava’s response this time around though was rather castigating towards the global testing body, which incidentally, he claimed “was funded to a large extent by automotive component manufacturers like airbags”.
It must be noted that the first NCAP (New Car Assessment Programme) was created in 1979 by the United States National Highway Traffic Safety Administration (NHTSA) to encourage manufacturers to build safer vehicles and consumers to buy them.
“NCAP assumes all regulators world over really don’t know their business,” Bhargava said, and added that NCAP thinks they knows their business better than anybody. However, nobody looks at “why accidents happen in India”. When you really think of it, Bhargava argued, “Should safety not be related to preventing accidents?”
He pointed out two major areas why India is way behind others – vehicle fitness and the way Indians are handed out driver licences. It is not correct to keep loading cars with safety features when we don’t look at vehicle and driver fitness, he reasoned.
Lack of laws, regulations and certification for vehicle fitness in India to ensure vehicles on road remain compliant with safety features are a major concern, he said. The other major reason of higher accidents in India is driver errors, emerging from the fact that issuance of driver licences in the country isn’t backed by proper education, rigorous training and tests. “How much does a person who gets a license know how to drive safely and correctly?” he asked.
Bhargava said Maruti has developed a whole lot of safety systems, and has also invested in creating a driving schools with advanced simulators. Nonetheless, despite efforts made to get State laws changed to bring about proper driving tests before issuing licences, “for various reasons that is not happening”.
His comments were later corroborated by Rahul Bharti, Executive Vice President – Corporate Planning and Government Affairs, Maruti Suzuki India, who said perceptions at times are based on “fickle parameters”. In many of Maruti models, the company has gone much beyond compliance, Bharti claimed. “We are a company of good engineers, but not so good communicators,” said Bharti tongue in cheek.
Uniform Taxation Not Desirable
In reference to the stress the world went under in the last couple of years due to the pandemic, and the subsequent semiconductor shortages and supply chain bottlenecks, the Maruti Chairman said “the worst is behind us”. Vehicle sales have continued to grow month-on-month, reflecting a steady recovery. In fact, FY23 promises to close with the highest ever vehicle sales in the country.
Growth notwithstanding, the industry has for long been impacted by unfavourable taxation. Bhargava said taxes levied by the government on vehicles put them beyond the reach of many in the country. “Government policies are such that they treat cars as luxury products that need to be heavily taxed,” he said. This is one of the reasons why the industry growth has slowed to 3% from 12% in the past 12 years, Bhargava said.
While calling for rationalisation of all taxes on motor vehicles in India – which have historically been among the highest in the world – Bhargava said taxation should be treated like it is in the rest of the world.
“You can’t grow an industry with 50% taxation,” he said. It must be noted that the GST Council recently announced a single definition for sports utility vehicles (SUVs) across all states. It said all cars with engine capacity of over 1,500 cc, length exceeding 4,000 mm and ground clearance of 170 mm will attract a GST of 28% and an additional cess of 22%, taking the effective tax rate to 50%.
All automobiles at present are taxed at 28% GST with additional cess ranging from 1% to 22% depending on the type of vehicle.
Bhargava said taxes should not be the same for different types of cars. A uniform tax structure across all segments of vehicles will not augur well for the sector growth, he further stated.
“The burden of regulatory changes on the small cars is far higher than the regulatory burden on big cars and that is changing the whole market behaviour. People who are buying small cars are not buying small cars in near the same numbers. Personally, I think it’s not a good thing, either for the car industry or the country,” Bhargava said.
Having said that, Bhargava doesn’t foresee a situation where the small car segment has not growth, and all the growth takes place in the higher segments. That is an important factor to be kept in mind – the regulatory effect on the car – and “that’s one argument for not having a uniform rate of tax on all small and big cars”, said Bhargava.
In Conclusion
Meanwhile, Takeuchi, who took over as the company’s new Managing Director and Chief Executive Officer on April 1, 2022, said he doesn’t yet know which is the best way to the future. Nonetheless, he believes in the vision of offering joy of mobility to consumers in a sustainable manner. That would not just include efforts to reduce CO2 from the car itself, but through measures across the values chain – manufacturing, distribution and sales, among others.
He is committed to taking all such initiatives that would lead to realising India’s committed target of becoming carbon neutral by 2070. “We’ll try to find all possible technologies that bring down CO2,” Takeuchi said.
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