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Automakers seek delays, exemptions to India’s planned new rules for parts: Sources

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NEW DELHI: Foreign automakers are seeking delays and exemptions to India’s planned new quality rules for imported auto parts, arguing the regulations will increase costs, hurt sales and disrupt supply chains, sources with direct knowledge of the matter told Reuters.

Prime Minister Narendra Modi is keen to reduce imports to boost local manufacturing to make India more self-sufficient and enable it to play a bigger role in the global supply chain. That said, the move is seen mainly aimed at slashing the amount of lower-quality imports from China.

“There is short term pain but there is long term gain,” Commerce Minister Piyush Goyal told an auto convention last week, saying India has become a dumping ground for low-quality goods by not having standards similar to other countries.

New rules mandating stricter quality checks have been flagged in stages for various auto parts since early this year and tighter regulations for wheel rims could be introduced as soon as October, according to a draft government notice.

All automakers will have to comply, but foreign premium brands such as Daimler’s Mercedes-Benz, BMW and Audi will suffer most as they have the highest ratio of imported parts, four auto executives told Reuters.

“It’s just an additional compliance burden and will not lead to higher local production because the volumes for luxury are too small to achieve economies of scale,” said one of the executives.

The sources declined to be identified, citing sensitive negotiations with the government.

Luxury carmakers account for less than 1% of India’s annual passenger car sales in terms of volume although they contribute roughly 10% in terms of revenue.

Executives from premium German brands as well as Volkswagen AG, Ford Motor Co and Toyota Motor Corp have held several rounds of talks with government officials in recent weeks, sources said.

Martin Schwenk, head of Mercedes-Benz India, said in a statement to Reuters that additional requirements “will make low volume business unviable”. His company is requesting a “reasonable time line for mid to long term implementation, and exemptions for low volume manufacturers in the short-term.”

Volkswagen Group’s India unit also said in a statement that for premium vehicles it was not possible to localise a “majority of components or spares as the total size of market is marginal.”

Other automakers named in this article did not respond to Reuters requests for comment.

Automakers are also lobbying through the Society of Indian Automobile Manufacturers (SIAM) which sources say is seeking up to a year to comply with the rules for higher volume vehicles where parts can be sourced locally.

The industry body is also seeking exemptions for low volume cars such as luxury models and for parts which automakers directly import as opposed to parts imported by trading companies and by vendors in the after-sales market, the sources said.

Mercedes’ Schwenk said the company had addressed its concerns through SIAM to relevant authorities and was “hopeful of a positive outcome”.

In addition to those lobbying efforts, Volkswagen, Mercedes and BMW also held a meeting with the German ambassador in New Delhi in July to apprise him of the issue, sources said.


Unwelcome Complexity


The draft government notice for wheel rims calls for new rules to go into effect from Oct. 1 and includes a requirement that there be an audit of the plant where the rims are made. That would be difficult with current travel restrictions in place due to the coronavirus pandemic, sources said.

It was not clear when the draft notice might be finalised.

To receive a shipment of imported cars or knocked-down car kits an order needs to be placed with global headquarters at least four months in advance, executives at two automakers said.

“If there is no clarity, the headquarters will not take new orders and sales will suffer,” said one of the executives.

From April 1, 2021 similar rules will apply to windshields and other safety glass. In June, India also made it mandatory for companies to get a licence to import certain types of tyres.

“This is against every tenet of ease of doing business,” said a senior auto executive, noting the new rules come at a time when the pandemic has hit revenue and demand, and could discourage further investment in India.

“Much more than the cost it is the complexity which affects the willingness of global companies to continue selling affected car models in India,” the executive said.

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Kia Motors breaks into operating profit in its first year of India journey

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MUMBAI: South Korean automaker Kia Motors has become one of the quickest to turn operationally profitable in India’s highly competitive passenger vehicle market.

In fiscal 2020, the first year of its operation in India, the company produced more than 100,000 vehicles and posted revenue of Rs 10,838 crore, when the domestic market delivered its worst performance in a decade.

Kia posted an operating profit, or earnings before interest, tax, depreciation and amortisation, of Rs 308 crore in the year ended March 31, 2020, according to its filings with the Ministry of Corporate Affairs. Interest pay-out and a significant depreciation cost, however, pulled Kia into a net loss of Rs 326 crore for the year.

In the ongoing fiscal 2021, if Kia manages to attain its target of producing 200,000 vehicles, the company may post a turnover of nearly $2.4 billion (Rs 17,000 crore), as per ETIG analysis.

It had sold more than 105,000 units in the last fiscal year where exports contributed about a fifth of the total volumes.

In a market where global behemoths like General Motors, Ford and Volkswagen struggled to cross a 2-3% market share even after being present for over a decade, Kia has grabbed a 5% market share so far in FY21 and is knocking at the podium just behind Tata Motors and Mahindra & Mahindra.

With just three products in its portfolio, which are all utility vehicles, Kia now has a 13-15% market share in the segment.

The combined turnover of Kia and sister company Hyundai Motor in India was 63% of market leader Maruti Suzuki’s turnover in FY20. Their combined market share was about 23-24%.

Kia had invested Rs 8,771 crore in its Indian operations till FY20, out of which Rs 2,501 crore was made in the previous year.

Its average realisation per vehicle was Rs 10.2 lakh in FY20, which was 1.5-2.1 times that of the top two car makers — Maruti Suzuki and Hyundai.

The revenue of Kia was nearly equivalent to the passenger vehicle division of Tata Motors, however there is a sharp contrast in the operating profit picture of the two companies. Kia posted a margin of 2.9% in FY20, while for Tata Motors, it was a negative 9.8%.

The operating profit margin of Maruti Suzuki and Hyundai were 9.7% and 10.06%, respectively.

A strong volume performance of the Indian subsidiary is helping Kia Motors grow its size in the global operations. Contribution from India grew to 3.9% of Kia Motors’ global revenue in the July-September quarter from 1.4% a year earlier, according to a company presentation.

The Indian unit’s vehicle dispatches grew 175% in the September quarter, the highest in any market for Kia Motors globally.


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Transport ministry proposes changes to help appoint ‘legal heir” of a motor vehicle

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NEW DELHI: The ministry of road transport and highways has proposed to ease the transfer of ownership of a vehicle after the owner’s death, by adding a nominee at the time of registration.

The change has been proposed in line with the practice of nomination while opening a bank account, or health insurance policy.

“It is generally a long-drawn process if the vehicle is in the name of a single person, a family member has to prove that they are the legal heir if they want the vehicle to be transferred to their name,” a transport ministry official told ET.

Now, the vehicle will now be automatically transferred in the nominee’s name if they upload the owner’s death certificate on the Vahan website, the official added.

Nomination facility is proposed to be incorporated at the time of registration of the vehicles. The proposal will help family members of the deceased person to transfer the ownership of the vehicle in a hassle-free manner. Vahan database maintained by the ministry of road transport and highways is an online repository of registered vehicles in the country.

“This would help the motor vehicle to be registered or transferred in the name of the nominee, in case of the death of the owner of the vehicle,” the transport ministry said in a statement on Friday.

“The process is otherwise cumbersome and non-uniform across the country,” it added.

The ministry has invited suggestions and comments from the public and all stakeholders on the proposed amendment to the Central Motor Vehicles Rules, 1989 in this regard.

The ministry has proposed changes in certain rules to incorporate “proof of identity of nominee, if any” to enable the owner to nominate anyone to be the legal heir of the vehicle in case of death.

It has further been proposed that in case where the nominee is already specified, the vehicle will be transferred in the name of nominee and nominee will have to upload the death certificate on the portal to inform the registering authority and apply for a new certificate of registration in his name through the portal which will be faceless if Aadhaar authentication is chosen by the nominee.


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Only BIS-certified helmets to be made, sold in India for two-wheelers

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NEW DELHI: The government on Friday said only Bureau of Indian Standards (BIS)-certified helmets would be manufactured and sold in India for two-wheelers.

This would help in avoiding sale of low-quality two-wheeler helmets in the country, which would help in protecting persons involved in accidents from fatal injuries, the Ministry of Road Transport and Highways said in a statement.

“The Ministry of Road Transport and Highways…has issued the ‘Helmet for riders of Two Wheelers Motor Vehicles (Quality Control ) Order, 2020′.

“Protective helmets for two-wheeler riders have been included under compulsory BIS certification and the publication of the Quality Control Order,” it said.

Following the directions of the Supreme Court Committee on Road Safety, a committee was formulated to consider lighter helmets in India suiting the country’s climatic conditions and that for ensuring compliance among citizen to wear the helmets.

The committee had experts from different fields, including expert doctors from AIIMS and also from BIS.

The committee in March 2018, after detailed analysis in its report, recommended lighter helmets in the country, and the ministry accepted the report.

According to the recommendations of the committee, the BIS has revised specifications through which it is expected to make lighter helmets.

The total number of two-wheelers being manufactured in India annually stands at about 1.7 crore.

The International Road Federation, a Geneva-based global road safety body working for better and safer roads worldwide, welcomed the road transport ministry’s move to bring helmets for two-wheeler riders under the mandatory BIS regime.

“This much-awaited move means the sale of non-BIS certified helmets will be an offence once the notification comes to effect,” K K Kapila, president emeritus of the International Road Federation, said.


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