Interview with Vishnu Mathur, Director General, SIAM

Company Description: Society of Indian Automobile Manufacturers (SIAM) is the apex Industry body representing leading vehicle and vehicular engine manufacturers in India. The association works closely with all the concerned stakeholders and actively participates in formulation of rules, regulations and policies related to the automobile Industry.

SIAM organises the biennial Auto Expo series of trade fairs in co-operation with Confederation of Indian Industry (CII) and Automotive Component Manufacturers Association of India (ACMA).SIAM has also been striving to keep pace with the socio-economic and technological changes shaping the automobile industry and aspires to be a catalyst in the development of a stronger automobile industry in India.

Prior to joining SIAM, you had served as the Executive Director of Automotive Component Manufacturers Association (ACMA). Before this you were with CII.  You have also been involved in the development of the Automotive Mission Plan (AMP) and were also a member of various committees related to the automotive industry. What has been your overall experience?

As you had mentioned in the question, I came into the automobile affiliated industry in 1994 with ACMA. It was a threshold change for me to join ACMA. Before that, I had worked in various sectors. But there is no such sector like ACMA which has so much of depth. When I joined this association, I started to understand what the automobile industry is all about and how the entire supply chain works. It is very different from most other sectors. In fact, it’s a very peculiar kind of a sector which has its own idiosyncrasies, specialisations, and ways of working. It took me a long time to actually learn and understand how this industry ticks. And we were dealing with a large number of companies at that point of time. And a sizeable number of them were small, micro and medium enterprises which had their own set of peculiar problems. New learnings came out everyday. This is because new kinds of services were designed by ACMA to cater to the industry’s growing requirements. Moreover, it was a time (post 1991) when the Indian economy opened up which resulted in removal of tariffs, delicensing of products, dismantling of import restrictions, etc. Initially the auto component industry was trying to manage this sea change that happened because of the liberlisation policy. We ensured that the auto component industry moved from a protectionist attitude to more of a liberal way of doing things with full market competition. What we had to do was to redesign many of the activities or initiatives that we used to do, in order to help the industry in developing their internal strengths and becoming more globally competitive.

How do you see the 2012 Auto Expo turning out in terms of footfalls, launches, etc? How are the infrastructure bottlenecks being addressed?

Firstly, in terms of new launches, we expect to see at least 55-60 new products at various exhibition halls. In terms of footfalls, we are expecting lower numbers than the previous year.  And that is largely by design and not by default. We intend to reduce the number of visitors this time as we don’t want to generate a huge turnout. In fact, if we have 1 lakh visitors on any particular day we’ll be compelled to stop further entry at the gate. This is primarily because unbridled entry into Pragati Maidan can lead to crowd mismanagement and safety issues.  The infrastructure bottlenecks like parking, etc, have been duly addressed because there is an additional space around Pragati Maidan that has been created during the Commonwealth Games 2010. Nonetheless, we are beefing up our park and ride facilities. To dissuade people from bringing their own vehicles, we will be running some shuttle vehicles from various parking sites to the hall. Furthermore, the layout of the exhibition has been drastically changed. Earlier, Halls no 1, 2,3,4,5 and 6 were earmarked for vehicles. Now all of them will be housing auto component firms only. Likewise, Hall no-18, which used to be a dedicated hall for component makers, will now be having only vehiclemakers.  So we have remodelled it in such a way that we can keep the exhibition of auto parts a little away from vehicles’ ones. This is because we don’t want the general visitors getting mixed up with the business visitors. This time we have also made it sure that no company will be pre-announcing the timings of its shows in advance to pull the crowds. So there will be no advertisements in the newspaper about any event. And all those shows would be happening in different halls so that people don’t congregate at any specific area. Lastly, the protocol gate is going to be Gate no-1 and not 3. The ticket sales will only happen on Gates no 1 and 2 in addition to all the metro stations.  The organisers have come out with a resolution that no registration will be entertained at the venue. So you either have to pre-register for passes or you have to buy the tickets from the gate. Incidentally, this is a requirement by the Supreme Court.

How much does the automobile industry contribute to the country’s GDP? And going forward, what will be the contribution by 2020?

When we did the AMP in 2006, the automobile industry’s contribution to the national GDP was 4-5pc. The expectation at that time was that the industry will be able to double the contribution to about 10pc by 2016. We are now midway. During the last 5 years, this industry has contributed significantly to India’s GDP.  When we did a study in 2009-10, we figured that the automobile companies have committed over 70,000 crore. A handful of them have been already deployed since it’s almost 2012 now. And many more are about to come.

The Indian government and SIAM had earlier envisaged ‘Cash for Clunkers’ policy to put decade-old vehicles off the road. So why hasn’t there been any headway on that?

Such a policy is indispensable for the industry because it can result in reduction of air pollution. Before the year 2000, there were no emission norms applicable. So for putting 15-20 year-old polluting vehicles off the road, we are constantly lobbying with the government to roll out a ‘Fleet modernisation programme’. It is not a stimulus package on the lines of ‘Cash for Clunkers’, but simply an effort in protecting the environment. I think it is a bit difficult to implement it because there are various ways to bring it into effect. There could be some sort of a mandation which is not even applicable in other countries. Or we could be have an ‘Inspection and Certification’ (I&C) regime, wherein you take a vehicle to a test centre to assess whether the vehicle is roadworthy or not. If your vehicle is still roadworthy after 15-20 years, you can still run it because it is certified. Unfortunately, that system in our country is very weak. We have one or two such centres in the country which are under-performers. Furthermore, such a law is applicable only for commercial vehicles in India. We cannot extend such a law to private vehicles unless and until we have the requisite number of such test centres. We would be able to roll out this ‘Fleet modernisation programme’ only if we have the infrastructure in place. We have recommended such an initiative to the government for the 2011-12 annual budget. We have apprised the government to incentivise people to junk their 15-20 year old car and buy a new one.

Another obstacle that the automobile industry is facing is the road infrastructure. Do we see them improving in the next 5-10 years? Can you please shed some light on this?

For the last 5 years, we have already seen a lot of improvement in our road infrastructure even though it has taken a lot of time. ‘Golden Quadrilateral’ or ‘East West Corridors’ are some of the initiatives that the government has taken to improve our road infrastructure. The issue is how do we go ahead from here and proceed to the next stage of development. The roads of Delhi and Mumbai have improved tremendously. But what we need to do is sustain the momentum because as the road infrastructure improves, the traffic also keeps on piling up. So the idea is to develop roads not just for one-time traffic management, but for the long haul.

Globally, most of the renowned companies are plagued by massive recalls. But in India, it’s a rare occurrence. So don’t you think there should be a comprehensive policy on recalls in India?

Firstly, I should say that “Product Recall’ is already a subject which is under discussion within SIAM and with the government. We are trying to see what kind of a policy we can have. A recall policy is very closely linked to our homologation & certification system. In a country like India, where there is a third-party certification of vehicles, your policy has to be different from other countries. In India, if a particular vehicle clears the ‘Conformity of Production’ (COP) standards, the company can continue to roll out such products. But if the COP fails continuously, the company may have to resort to recalls. Moreover, these OEMs rectify the minor defects during the regular maintenance check-ups.  In countries like the US, a company has a much higher responsibility as it is self-certifying its cars.

Globally, hybrid and zero-emission vehicles are catching up fast. But why has that not taken shape in India?  Is it because such products are technically infeasible here?

If you look at hybrid and zero-emission vehicles, the cost equation is not there as compared to conventional vehicles. To be more precise, the value proposition is not there in such non-polluting vehicles. So if I put the hybrid vehicle on the road which is twice the cost of a normal vehicle, there will be hardly any buyers. As for electric vehicles here, their performance, range, expectation, price and other attributes make it commercially infeasible. It will still take a little more time before such environment-friendly vehicles make a mark. That is where the government and the industry’s R&D efforts are going to focus on. If I can recollect, the Union Finance minister during the last budget (Feb’10) had announced that the government will launch a national mission on electric mobility. That mission has been carried forward and the industry is now in its final stages of preparing a complete set of recommendations to the government on how to promote electric and hybrid vehicles. And these recommendations, which include policies, infrastructure creation, incentivisation, indigenous production, etc, are also meant for the 12th five year-planning. 

It’s a known fact that when it comes to car sales, diesel versions are accounting for the maximum numbers primarily because of the volatile petrol prices. But at the same time, prospective bike buyers are the worst suffers. So are you lobbying with the government to have a clear policy on diesel vehicles? If yes, what can we expect from that?

Before 2004, we were predominantly a petrol car market. But if you talk about diesel vehicles being the highest in demand in the last three months, you are absolutely right. This is because the price differential between petrol and diesel has started widening. So now we have 60pc diesel car buyers of the total sales. But if the current trend continues, there may be 80pc diesel cars out of the total units sold. And yes, there should be a long-term policy on pricing of fuels. This is because we have witnessed that diesel is increasingly used in personal vehicles than in tractors or trucks. There has been a strong reaction from some quarters claiming that the purpose of rationalising diesel prices has not been met. As recommended by a number of committees, we are totally in favour of market pricing of diesel. Having said that, a targeted subsidy should be given to the agricultural (tractors) and other essential sectors for which the subsidies have been designed for.  That’s what we say is the right approach. We also have to bear in mind that diesel-run vehicles deliver a higher mileage than its petrol versions.  As a result, it reduces the carbon footprint of the company as the greenhouse gas emissions are reduced. Moreover, the import of crude oil will go down because the amount of fuel required is quite less. So there is a foreign exchange security issue also involved.  Ergo, it won’t be a good idea to discourage the use of diesel cars because of the subsidy offered by the government.  So we need to have a holistic and clear-cut policy on different kinds of fuels so as to treat all technology equally and the companies can make investments accordingly. And we are vehemently opposing any additional taxes on diesel-run cars.

Why is SIAM averse to the free trade agreement with Europe when it comes to importing fully-built vehicles into India? Don’t you think Indian companies will benefit more with their small cars than European companies with their large cars?

There are various reasons behind it. Firstly, India has given a free market access to any automobile company to invest and set its shop here. No company needs a local partner and the approvals are easily granted. So if a trade happens and the manufacturing operations don’t happen, then we don’t stand to gain as employment opportunities are not generated. Secondly, if we agree for a free trade agreement for vehicles with Europe, we have to do the same with South Korea, Japan, etc. So we don’t want to create a comparative imbalance for non-European companies who have invested massively in India. Lastly, the export of small cars from India is done by South Korean and Japanese companies and not by any European ones. So it’s not a win-win situation.

Do you think India could become the R&D hub for global automobile companies? If yes, what could be the possible reasons?

I would say it is already happening in a big way. Most of the global OEMs have set up world-class R&D facilities in India. In fact, a lot of them are offshoring their development activities to India. This is aided by the fact that we have a very formidable pool of IT professionals who play a key role in product development. A lot of vehicles sold in other parts of the world have vital inputs from India.

Lastly, what are your expectations from the forthcoming budget? Have you made any proposals to the govt?

Even though there are no huge expectations, we have asked for a reduction in taxes on large vehicles which is at 22pc currently. We have asked the government whether it can be brought to reasonable limits of say 16pc. In terms of customs and import duties, we have not asked for any reduction or hike. And as I said earlier, we have also asked for a Fleet modernisation Programme.