Indian Auto Industry, Taxes and Safety Features

Economics plays an important role in deciding the safety of a car. Money always gives Better Safety.

Manufacturers can make a safe car with a strong body with safety design features and better technology. But all this requires investment and it increases the cost of car.

Unfortunately our govt of india and all state govts are just sucking lot of taxes from auto industry and people. Auto industry is one of the Heavily taxed segment in india.

We can identify 3 major reasons in reducing the car safety in india.

1. MILEAGE. Stronger Chassis Steel and Extra Shields around car doors increases the safety and improves safety from collision but it adds weight to the car, so it will bring down the MILEAGE.
1. Indian government charges around 150% tax on petrol and diesel so the cost of fuel is so high and many people want more MILEAGE because they can’t afford the fuel easily.
2. For every 100 Kg taken out of the vehicle, the fuel economy increases by 4–5 percent. So manufacturers are forced to reduce weight and thereby compromising safety. This is fine as long as the car drives within city limits as the roads are congested and doesn’t make much harm. Only problem is on highways.
2. Manufacturing Cost. Better Technology like collision detection sensors, air bags and intelligent driving software will improve safety but all this needs investment in R&D and manufacturing cost, which increases the car cost.
1. The taxes on the auto industry is so high manufacturers can’t afford to include them in regular variants.
2. GST on cars is 28% plus Cess is 22%. Makes it 50%. On top of that State Road Taxes are around 25%. Total Tax is around 75% on the car.
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Note: Road Tax is on Invoice/Ex-Show Room Price. (Mfg Cost+GST), So this comes around 20% to 30% on the Manufacturing Cost.

If the Mfg cost Or R&D cost increses by 1 lakh, Govt wants its share of 75k from the buyer. This stops the manufactures to innovate or add additional safety features. Thereby denying the safety. So Manufacturers don’t spend much on car cost and continue to give old and obselent technologies to indian consumers.

1. 1. Weird govt rule like if car length is below 4 meters govt gives 25% tax reduction. This reduces the car cost but now manufacturers are forced to accommodate luggage, 4 people in a crunchy area. So they compromise on the front bonnet length and there by if a head on collision happens, there is not enough room to absorb the force and to protect the passengers. No idea why can’t they link this reduction of 25% tax to mfg cost (5 lakhs) instead of length and engine power.
   2. Indian purchasing power makes people to stop buying costly cars, majority of population can’t afford so they comprise on safety and go and buy cheaper cars. Once the cost crosses a thread hold number, the safety increases and gives a good car but it’s costly. If we take Mfg cost around 10 L then tax is 7.5 L, so a base price of 17–18 L on road-price of the car May give a better safety.

   Safety is directly proportional to Money. Indian people purchasing power / Incomes should increase so that they can afford the technology and manufacturing costs and thereby get a safety car

   If taxes on fuel prices comes down, manufacturers can add more steel to car and increase the safety. People will buy them without thinking much on Mileage.

   Going forward, with electric propulsion, this should improves and people really not worried much on mileage.

   Govts should decrease taxes to below 30% so that people get more technology in the present pricing only. Ex: 6 lakhs car, 2 lakhs is tax, if tax comes down by 1 lakh, Manufactures can give that 1 lakh extra as a safety in the car or better technologies of 1 lakh to consumers.

   Key Point: High Taxes on Auto Industry and Fuels are indirectly pushing people to buy low safety cars. Govt should reduce taxes. This gives boost to economy and people buy more cars and increase more plants and more jobs and overall health of the economy. Unfortunately the backlog of socialism mindset make the society think car is a luxury item and should be penalised with heavy taxes and causing so many issues.

   Indian road accidents are highest on this planet earth and we loose around 1.5 lakh mostly young and productive people per year. Govts should think seriously into this and improve safety of vehicles by giving tax reductions.