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Honda hits out at 'uncertain' rules
June, 19th 2008

Frequent changes in automobile policy have come for some strong criticism from global carmakers who are terming the Indian market uncertain.

Given that the governments small car definition is engine size specific - 1200 cc (petrol) and 1500 cc (diesel) cars enjoy lower excise duty of 12% against 24 for all other big cars the recent introduction of additional excise duty is strange, they say.

Honda Motor Companys Asia Pacific chief, Masahiro Takedagawa said, There is rampant fluctuation in Indias macro economic conditions, which is making it unattractive and creating uncertainty in the market. India is now part of the global market and will share any changes in other global economies. It is one of the biggest emerging markets, but the government is trying to curtail demand and curb inflation, and we are feeling its impact. A new banking policy results in higher interest rates, which is discouraging consumer confidence and impacting demand in the market.

 Mr Takedagawa was also sceptical about the regular fluctuations in the currency. We import about 25% of our automotive requirements. The changes in forex created a lot of confusion in our operations. Now we have decided to increase localisation and will come up with a stamping (for metal frame of cars) facility at our new plant in Rajasthan, besides sourcing maximum components from the local market. he said.

Mr Takedagawa is not the first CEO of a foreign car company to raise the issue of ever-changing polices. In the past, many global automakers like Hyundai and Ford have raised the issue of skewed automobile policies leading to utter confusion in the market. Hyundai Motor India managing director and CEO H S Lheem had earlier said, The is no stability in government policies . We are the largest exporter of cars from India, but there is no incentive to sell locally made cars overseas. We have urged the government to stay firm on all its policies.

Ford Motor India has maintained that it is unfair that the excise duty of small cars is coming down but remains unchanged on bigger cars. The excise duty gap between big and small cars is widening and creating disadvantages for bigger car manufacturers like us. The governments decision benefits only a section of car makers at the cost of the entire automobile industry, Ford Motor Indias former president and CEO Arvind Mathew had said earlier.

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