The current slowdown in the Indian economy is most evident in the automobile industry, which happens to be one of the largest employment creators in the private sector. Sales of new automobiles are down by more than 20 percentage points compared with a year ago. But, curiously, the used-car market is quite vibrant: a BusinessLine report last October said the sales of used cars had gone up by around 16 percentage points in the April-September period compared to the previous six months.
From next April 1, all new vehicles sold will have to follow BS VI emission norms. The prices will be higher. There can be other unforeseen additional operating costs, especially for diesel vehicles. And there is the prospect of more and more electric vehicles becoming available to consumers. These factors can keep potential buyers away from the showrooms.
The market response to new vehicles decides the health of the industry. It, therefore, becomes necessary to initiate policy measures to make the purchase of new vehicles less burdensome, if not attractive. These measures can cover several areas, most importantly the Motor Vehicles Act and Rules. Since cars form the backbone of the industry, let us look at what the government can do to improve their sales.
At the time of registration of a car, road tax is charged for 15 years. But some of the cars in the market are so flimsy that they will not run for that long a period. Then what is the logic behind this practice?
A wise government would charge road tax for five-year periods, for such a decision can yield several benefits. One, the lower cost at the point of purchase will be attractive to potential buyers. Two, the money saved will naturally be spent to buy other goods, which will help the economy. Three, the need to present the vehicle for renewal of registration every five years will persuade the buyer to keep the car in good condition in terms of both road-worthiness and emission levels.
Registration of vehicle
Talking about registration, why should a new vehicle be presented before the Regional Transport Officer only to check the engine and chassis numbers? Already the dealer collects the road tax and also passes on the details of the vehicle, supplied by the manufacturer, and its buyer to the RTO. Since all this is done online, and there is little chance of wrongdoing, is it not possible to make the entire registration process online? Technology for the accurate transfer of the details, like QR Code, is available now. This can help avoid to a great extent chances of official corruption. The online process may be adopted for renewal of registration as well.
Corruption is not the monopoly of the public authorities. In spite of a Supreme Court order passed in 2012 making it illegal, dealers across the country take “handling charges” from buyers of all kinds of vehicles. If challenged citing the court order, dealers generally mention the services they render in getting the vehicles registered.
What is hidden in this claim is a link between the dealer and the RTO authorities that is not necessarily clean. The law ought to crack down on this practice after making the registration process online. The road tax and all other charges have to be listed in the final bill as individual components.
A perennial complaint of car owners is about being cheated in the matter of maintenance support. After buying a car you often feel that you are at the mercy of the dealership. A recent experience of this writer, who uses a car from a prominent manufacturer, would throw some light on one aspect of this. The company makes vague claims that the dealerships sell spare parts across the counter, but the one I approached refused initially to do so, citing various excuses. The real reason is, if spare parts are freely available the car owner will be less dependent on the dealer who makes much of his money from repair work.
Equally vague are the manufacturer’s claims that parts are available online. Only a limited number of parts, that too of a few models, are listed, and inquiries often result in evasive answers. This is clearly violative of the Competition Commission’s directives.
It is the responsibility of the government to ensure that quality spare parts are available in the market so that buying a car does not mean inviting trouble.
Insurers’ unfair practice
When one speaks about the Motor Vehicles Act, one cannot resist the temptation to talk about a curious practice that was widespread in Chennai and various places in Kerala, which saw a huge number of cars and other vehicles go under water during the floods, in 2015 and 2018 respectively. In almost all these cases the insurance companies paid their owners the “insurer declared value” (IDV) and took the vehicles and their documents into their possession. There is no clarity as to what happens to all these vehicles, but at least some of them are sold to third parties after necessary repairs. This appears apparently illegal.
Section 55 of the Motor Vehicles Act says that if a vehicle is rendered unfit for further use, the RTO with jurisdiction of the area should be informed of the matter so that the registration of the vehicle is cancelled. The IDV paid to a vehicle owner is actually the compensation for the damage, and not the price. The insurer has apparently no right to take away the vehicle: it has to be left with the owner. In the present practice the vehicle owner suffers an additional loss: repayment of the road tax for the remaining period of the 15 years, which is his\her right.
The government should make appropriate changes in the Act in order to protect the legitimate interests of vehicle owners. Owning a car is an expensive affair. The lower the expense, the better the automobile industry’s future.