NEW DELHI, 2 September 2004 — India’s potential to emerge as a global manufacturing hub for small cars is being scuppered by high taxes and poor infrastructure, a senior industry official warned yesterday.
India is the second-biggest market for small cars after Japan with sales of over 100,000 units in the fiscal year ended March but car ownership is still one of the world’s lowest, according to Jagish Khattar, president of the Society of Indian Automobile Manufacturers (SIAM). “I believe that India has the potential to emerge as the manufacturing hub for small cars in the world,” Khattar told SIAM’s annual conference here.
Only seven in every 1,000 Indians owns a car as compared to 12 in the neighboring countries of Sri Lanka and Pakistan. The figure is 10 to 15 times higher for advanced countries such as Britain and the United States. “I see our dismal car penetration ratio as a tremendous opportunity even if we were to take the modest goal of reaching the ratios of Sri Lanka and Pakistan,” Khattar said.
“Once we step out of the arena of the marketplace, and look at the realm of regulation, there is an entirely different world, marred by antiquated rules and abysmal enforcement,” he added.
The total tax imposed amounts to 54 percent of the manufacturing cost of the car — a throwback to the socialist policies of the Indian government prior to the 1990s when cars were seen as luxury items.