With the new government remaining steadfast on overhauling safety regulations followed by car manufacturers, companies fear that the 10-15% upward revision in prices will adversely impact sales.
They say that a price increase upwards of Rs 35,000 per vehicle for an airbag fitment will lead to shrinking affordability levels among buyers, adversely impacting sales.
The government has been moving forward towards making safety features such as airbags and anti-lock braking systems mandatory in all new personal vehicles. These features, which come as standard in Europe and US, are offered only on the high-end variants sold in India.
While the country's roads remain one of most unsafe motorable roads in the world, with one death reported every three minutes, the rising concern comes on the back of more than half a dozen India-made hatchbacks failing safety tests at a UK test facility.
Mayank Pareek, president (passenger vehicle business unit), Tata Motors said, "Definitely roads should be safer, the customer should be safer. In India 50% of the customers are upgrading from a two-wheleer or no wheeler. For them any four wheeler is safer and that aspect should be kept in mind. Putting airbags makes the car too expensive, then motorisation will not happen."
Manufacturers claim that they have been offering airbags in higher and more expensive variants of sedans and now even hatchbacks, allowing the customer to choose as per his limits. However, if it is made mandatory buyers of small cars, which make up more than two-thirds of the domestic car volumes, will revisit their buying decision.
“Some of the entry level cars even if you increase the price by Rs 5,000 the customer may not buy. This segment has highly price elastic products. If a person buying a Rs 1 crore car and price increases by 10% nothing happens but a person buying a Rs 300,000 car for him paying that extra Rs 5,000 becomes important. Rs 5,000 is the cut off line, if you increase the price beyond that then they put off the buying decision”, added Pareek.
Government has been in dialogue with the manufacturers for implementation of this plan, which has been strongly opposed by almost all the car makers including the top two manufacturers, Maruti Suzuki and Hyundai Motor India. An average increase of Rs 35,000-40,000 in small cars and an even bigger increase in sedans and sports utility vehicles will most surely cripple demand, fear manufacturers.
"In India only 18 per 1000 people have cars compared to 30-35 in some of our neighbouring countries. One of the reasons people cannot enjoy motorisation is because they find the cars too expensive. That is why all manufacturers are finding ways to reduce costs through localisation. On top of that if you add features like this people will continue to ride two-wheelers without the situation being any safer than what it is right now", added Pareek.
Recently, India’s largest selling premium hatchback Maruti Swift and budget car Datsun Go landed a zero on a random test conducted by UK-based agency Global New Car Assessment Programe (GNCAP) on safety. Both cars received "zero star" safety rating for their adult occupant protection. However, the Swift scored "one star" for child occupant protection. The tests were conducted at a speed of 64 km per hour.