It's not the length that matters: Toyota, Honda

NEW DELHI: Japanese carmakers Toyota and Honda Motors have asked the Indian government to change the criteria of classifying a car as ‘small’ that attracts lower taxes in the country.

The two automakers have said that fuel efficiency, emission norms and passenger safety should be used to classify a car as small to avail lower excise benefits rather than the length of the vehicle.

The opinion of these global carmakers have now divided the Indian automobile industry, which under the banner of Society of Indian Automobile Manufacturers (Siam), has been demanding that length should define a small car rather than the engine size. Siam has maintained that fuel and engine capacity should not be included in the definition of a small car.

Toyota, which has announced fresh investment of Rs 3,800 crore last year to make India its small car global manufacturing hub, has asked for change in the existing policy.

In a presentation to the prime minister’s principal secretary, TKA Nair, TMC’s senior managing director and member of the board Akira Okabe said, “Our basic philosophy is start small and grow big. We are looking at the small car to grow volumes in India and the criteria of 4-metres of vehicle length should be removed from the small-car definition.”

Under the government policy, a small car with 4-metre length along with 1,200 cc petrol or 1,500 cc diesel engine attracts a lower 8% excise duty as against 20% duty and Rs 15,000 additional levy in case of all other cars made in India.

Toyota is looking at a new second plant near Bangalore to make small car, which would rollout in the domestic market in early 2011. It also plans to make India its export hub for the proposed global small car project and export cars by 2012. In the first phase of production the company would roll out 70,000 units annually.

On the same lines, Honda Motor which operates in India through a joint-venture, Honda Siel Cars India (HSCI) has sought to make fuel efficiency and automotive safety as the sole criteria for small cars in India. “Ideally there should not be any regulation on the length of the car in India as any good car will be based on performance and global safety standards. We are launching a new small car in 2011-12 which will confirm to Indian government’s current small car definition, but following global automotive standards would help India emerge as a real hub to make cars for the global markets.”