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India’s mandatory 6 airbag clause is hurting carmakers: Report

With some of the world’s most dangerous roads, India published a draught proposal in January mandating the installation of six airbags in all new passenger vehicles starting October 1. However, automakers in India believe that mandating six airbags in passenger cars will raise vehicle prices and drive away potential buyers. It should be noted that the suggested rules for six airbags have not yet been finalised.

According to R C Bhargava, such a measure would harm sales of low-cost automobiles and put more pressure on companies already dealing with high prices. Bhargava predicts that sales of small automobiles would continue to fall in the wake of the epidemic, while demand for large, costly vehicles will rise.

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With yearly sales of roughly 3 million units, India is the world’s fifth-largest vehicle market, headed by Maruti Suzuki, which is majority-owned by Suzuki Motor of Japan, and Hyundai Motor of Korea.

In the country`s price-sensitive market, the majority of cars sell for around $10,000-$15,000.  Providing driver and front passenger airbags in all cars is already mandatory. Adding another four airbags will increase the cost by Rs 17,600 ($231), according to auto market data provider JATO Dynamics.

In some cases, the cost could be higher as companies will need to make engineering changes to the car’s structure to accommodate the additional airbags, said Ravi Bhatia, president for India at JATO.

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“Companies will need to decide whether it is feasible to make the changes and if the model will sell at a higher price. The damage will be significant at the lower end of the market where there is huge price sensitivity,” he said.

More than 133,000 people were killed in 355,000 road accidents in India in 2020, government data showed. Car passengers accounted for 13% of deaths.

India’s road transport ministry is firm on its plan and is pushing automakers to agree to the rules, two sources told Reuters. The ministry estimates four additional airbags to cost no more than $90, but even then it is facing resistance.

The Society of Indian Automobile Manufacturers has asked the ministry to “review and reconsider” the rules saying “side and curtain airbags are not mandated anywhere in the world”.

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In a letter to the ministry in February, the industry lobby group warned that with the cost of cars steadily rising in recent years enough time must be given for the airbags rule “to reduce risk of impact on industry growth”.

The Automotive Component Manufacturers Association (ACMA) has told the ministry they can meet the additional demand for airbags but would need 12-18 months to ramp up local production.

The ministry, SIAM and ACMA did not immediately respond to a request for comment.

With inputs from Reuters

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