News: India takes big step in small cars

(TNN 09/04/2006) New Delhi - The FM has good reason to root for India’s small car credentials. In terms of sheer volumes, India is already right up among the top small car producers. Only Japan, with 1.77m units and Brazil with 0.85m make more small cars than India’s present tally of around 0.78m a year.

India’s tally is higher than western Europe’s 0.55m units. India’s small car segment has also seen decent growth this year. In ’05-06, small car sales — domestic and exports — hit 7.85 lakh units, up from 7.42 lakh in ’04-05, a growth of 6%. The figure includes B-segment models like Santro, Indica, Alto, Swift, Zen, WagonR etc and the A segment M800. India’s small car duty differential is similar to what Japan, Korea and Brazil have done. Japan’s government extended fiscal incentives to promote fuel-efficient mini cars to hike their market share from 9% in 1989 to 30% now.

Korea exempts small cars from taxes like acquisition, registration and rural development surcharge. Brazil allows lower industrial products tax on engines of less than 1 litre capacity. Its local market share has jumped from 4.3% (1990) to 60% (’04). Thailand is mulling similar incentives under its eco-car project and China hiked taxes on vehicles with more than 2-litre engine capacity from 8% to 20%.