Local car makers happy

By K. T. Jagannathan

CHENNAI, MARCH 31. The new Exim Policy must make local car makers happy. On one hand, it has sought to put them in some comfort by laying down stricter norms for import of second-hand cars, on the other, it has specified the types of new cars that could come into the Indian market from across the globe. Surely, many manufacturers, especially those which have sprung up in the post- liberalisation era, should breath a lot more easy now.

As far as the second-hand car import is concerned, the exim policy appears to have largely endorsed the concerns of local manufacturers. The ban on vehicles above three yearsold , fixing a five-year residual life, making it mandatory to conform to the Motor Vehicle's Act and provisions relating to supply of spares to such vehicles will help stop unbridled import of second-hand cars.

The insistence on pre- and post-shipment certifications, it is expected, will ensure that only quality vehicles enter the domestic market. By making it clear that the cars can be imported only through the customs port in Mumbai, the Government has sent out a clear signal that it will guard against sub-standard and non-genuine import of second-hand vehicles.

Surely, the car industry cannot ask for more. Given its compulsions to adhere to WTO rules, the Government has done a nice tight-rope walking without sacrificing the concerns of the domestic industry. No doubt, the policy has sought to ensure that India does not become a junk yard.

On the question of allowing new car imports, the exim policy appears to have hit upon a twin strategy. It allows import of new cars below 1,000 cc and above 2,500 cc. Letting cars above 2,500 cc into the country has a definite logic. The technology in this segment is not available within the country. Further, the business volume in this premium segment is negligible. Given these, allowing imports above 2,500 cc will help manufacturers of assorted varieties improve the range of their product offerings. Simultaneously, this will spur competition in this premium segment.

The impact of allowing import of new cars below 1000 cc is still being analysed. Largely, it is the public sector Maruti Udyog that is the dominant player in this segment. Others have also entered this segment lately. Perhaps, the exim policy has kept the consumer - largely upper middle class, - in mind. If the move can spur the domestic players to look inward and cut cost and price, this could trigger a virtual demand boom in this segment. The domestic players in this segment are putting up a brave front.

The effective custom duty of 85.33 per cent and the stipulation that car imports can come from only countries of manufacture can work as some sort of a barrier for uncontrolled imports. In this context, it is pointed out that only a few countries such as Japan and Korea are producing small cars of this type. What if they are able to produce a low priced car in this segment? Surely, small car producers have to sit up and take note.

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Section  : Business
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