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Why India can’t afford its first hybrid car

Why India can’t afford its first hybrid car
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First Published: Wed, Jun 18 2008. 11 30 PM IST

Updated: Thu, Jun 19 2008. 11 03 AM IST
Eco-friendly is in, but the cars aren’t. Not yet, at least in India.
Honda Motor Co., which sells the Civic sedan, launched the first hybrid car in India on Wednesday. For now, it’s all about showcasing advanced Honda green technology. In the process, if a few Indians buy the hybrid, that’s a great bonus. The car, which has sold 210,000 units since it was first launched in 2001, uses a petrol-cum-battery engine.
We all know that when car makers spend vast sums of money on technology and then put that into commercial production, it’s because that’s where the future of the auto industry is headed, not because they want a handful of consumers to marvel at nuts, bolts and shiny steel parts on four wheels.
In a market roiled by higher fuel prices, Honda’s Civic hybrid has every right to hit the spot with fuel-scrimping consumers, largely because hybrids typically consume up to a quarter less fuel than non-hybrid models. But India slaps such imports with a 104% customs duty, which all but guarantees that Honda will miss that spot by a mile.
By the time the Civic hybrid reaches any environment-conscious Indian consumer, it would have cost nearly double that of its petrol version. With such a steep price—around Rs21.5 lakh—the hybrid’s mileage advantage fades almost with the same speed that its eco-friendly fender accelerates into view.
We all know that in India, even the buyers of top-end BMW cars obssess over mileage. While well-heeled Indians often show they have really arrived with the purchase of a top-tier marque, secretly, irrepressibly and even artlessly, their love of bargaining shows up in their quest for fuel efficiency.
And, let’s face it, driving a Honda Civic, however green its pedigree, doesn’t exactly have the same connotation as driving a Mercedes. So, and unfortunately, few Indians will be willing to pay big bucks for an ordinary sedan with an extraordinary engine.
The Civic hybrid’s saga shows the fraught path to eco-friendly, fuel-efficient technology sold in India. For now, no Indian auto firm is selling a full hybrid and even Mahindra and Mahindra Ltd, which is developing indigenous hybrid technology, is some years away from a sophisticated hybrid engine, the kind that the Civic uses to switch between fuel and battery power. In short, India simply doesn’t have the commercial technology just yet. Actually, few countries outside Japan do.
Honda’s technology prowess is weighed down by clunky armour. It makes hybrids only in Japan where it, no doubt, has dedicated vendors to supply the sophisticated parts. While it sells plenty of hybrids in faraway places such as the US, Honda argues that the green technology is too sophisticated and costs a mile high to have multiple plants outside Japan. Clearly, a green Honda needs to be a profitable Honda.
In India the made-in-Japan hybrid thus becomes a car solely for not just the well-heeled but the few uber rich who also wear a green conscience. India’s punitive duties on imported cars are designed to protect the country’s still young automobile sector, which is nowhere as deep, wide and technology-driven as it is in Europe, North America or Japan, the Tata Nano’s frugal engineering notwithstanding.
The theory—actively encouraged by Indian companies—is that high tariffs will prevent overseas firms from shipping in knocked-down cars and, hopefully, encourage them to set up local manufacturing and all that comes with factories inside India.
That brings us back to the Civic hybrid. Honda says that through the industry lobbying body the Society of Indian Automobile Manufacturers (Siam), it is pushing for a lowering of customs duties on the hybrid. So far, despite the green cause, the government isn’t biting, focused as policymakers are on how to protect voters from $140 oil barrels.
Meanwhile, as much as Honda will lobby, other vehicle makers who don’t have this technology advantage—mostly Indian but also the South Koreans who are a bit late to the party—will stay on the sidelines. They are all friends in Siam, until it comes to selling their own cars.
With the abysmal public transport, metro projects notwithstanding, Indian drivers have no choice but to use two-wheelers and cars, no matter what happens to fuel prices—or the environment. So, why wouldn’t the Indian government or Siam for that matter want to do more to encourage fuel-frugal, low-emission cars?
A blanket removal of customs duty on imported cars would hurt domestic auto makers and leave a lot of unsold Indian cars in its wake, just at a time when car makers are really ramping up capacity here. Still, fuel frugality must be rewarded and green thinking encouraged. The US, for instance, gives tax subsidies to owners of green vehicles, as does Japan.
India should consider giving tax and other incentives directly to individuals who opt for vehicles that continuously stretch the mileage game and pollute less, not necessarily help individual car companies. And how about rewarding households that eschew multiple cars? Otherwise, what we will have for the foreseeable future are soaring petrol bills, green cars that we can never afford and a green future that we can never have.
How do you think Honda should market its $50,000 Civic hybrid in India? What if a cricket star or a Bollywood actor can be convinced to use it, much like Leonardo DiCaprio and Cameron Diaz made rival Toyota’s Prius a must-be-seen-in fashionable green car? Let me know your thoughts on my blog, Cabbages & Kings, ( blogs.livemint.com/cabbages) where we continue this conversation. You can also r espond to this column at firmfooting@livemint.com
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First Published: Wed, Jun 18 2008. 11 30 PM IST