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India, the world’s largest small car producer, is set to gain from the recent decision taken by some countries such as Germany, France, the UK, Italy and South Korea to give tax breaks and fiscal incentives to people buying small fuel-efficient cars.
Maruti Suzuki India managing director S Nakanishi said, “Demand for compact cars with low emission norms is rising globally. We have bagged large orders from Germany, France, Italy and the UK, where customers are getting incentives to buy compact cars”.
In the current fiscal, the export order of Maruti has doubled to 1.5-lakh cars, largely on the back of demand from Europe for its hatchback Alto, which is called A-Star in the domestic market. On an annual basis, the country produces around 15-lakh small cars annually.
Germany, France and Italy have come up with various methods in which the car owners can scrap older vehicles and buy new fuel-efficient models. For instance, Germany is paying E2,500 to people exchanging their old cars for new ones. Initial industry estimates show that of the 2-lakh cars swapped under the scheme, over 80% of new purchases made consisted of compact cars.
Similarly, the UK government offers a discount of £2,000 on new vehicles in exchange of decade-old cars. In addition to this, it also plans to offer £5,000 rebate on small electric vehicles in the next few years, and this is done with the aim to have 1-lakh electric cars in London alone.
Bangalore-based electric car maker Reva is the largest supplier of compact electric cars to the UK. Till date, it has exported around 1,200 cars. The South Korean government, too, offers 70% rebate on automobile taxes to customers who give away their 10-year old cars in return for smaller or hybrid cars. According to Kishor Ostwal, the chairman and managing director of the research firm CNI Research, over 55-lakh cars in South Korea alone have crossed 10 years of age and will have to be replaced with fuel-efficient cars.
With the surging global demand for small cars, Hyundai Motor India (HMI), the country’s largest car exporter, is expecting to achieve double-digit growth in exports in the current financial year. Last year, it sold around 2.53-lakh cars in overseas markets. A senior HMI executive said, “Our export order book is full till June as our small car i10 meets the strict emission norms of Italy, Germany and France. We are looking at exponential growth this year”.
Auto parts makers in India, too, are reaping the benefits of the shift in global consumer preferences. India’s largest engine piston maker Shriram Pistons and Rings MD Ashok Taneja said: “Our supplies of critical components for small-sized engines have jumped in the last one year. While bigger, fuel guzzler engines are getting discouraged globally, we have noticed a marked shift towards cars with small engines that meet strict emission norms in Europe and other developed markets.”
In the previous year, the country's export of cars grew by 54% to 3.35-lakh cars. India's total value of exports is $6 billion; however when compared with other countries such as Thailand and Brazil, it is lagging behind. The Economic Times
May 8, 2009
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