Home > Opinion > Quick Edit > Opinion | Good costs, bad costs

India’s auto sector continues to remind us of the painful economic slowdown that India is undergoing. In August, sales of passenger cars slumped 41% year-on-year, with market leader Maruti Suzuki India Ltd registering a 36% decline. Sales of Alto, the company’s entry-level hatchback, have halved. According to news reports, Maruti Chairman R.C. Bhargava has apportioned some of the blame on a crisis of car affordability, or lack thereof. Extra costs borne on account of stricter safety and emission norms, in his view, have pushed cars out of the reach of people who may otherwise have been able to buy them. While he has also mentioned other factors that have held sales back, including higher road tax in some states and enhanced insurance charges, his point on safety invites a debate.

Apart from greener technology, India has mandated the installation of anti-lock braking systems and air-bags in all cars. It takes money to adhere to these norms, but there is a strong case for making these compulsory rather than treating them as optional. Consumers often ignore not only the invisible damage they do the environment, they also tend to overlook the worst-case risks they bear. Left to themselves, they may not want to pay for add-ons that don’t deliver immediately palpable benefits. In such cases, state intervention is justified.

If cars are too expensive, then other costs deserve scrutiny. Could better economies of scale be squeezed out by making fewer models, for example? Also, does the tax burden on vehicles in India really need to be higher than in other markets? There are no easy answers. But lives are as precious. We need cheaper cars, but not at the cost of safety.

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