Maruti Suzuki to discontinue small cars like Alto, Wagon R in India, here's why?

As of 2020, more than 133,000 people were killed and 355,000 were injured in road accidents in India, with automobile passengers accounting for 13% of those who died.

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Nitin Gadkari led Ministry of Road, Transport and Highways, in January 2022, published a draft proposal mandating automakers in India to install six airbags in all their new passenger vehicles starting October 1. With India having some of the world's most dangerous roads, the move received a positive response from car buyers and the auto industry in general. However, carmakers in India believe that mandating six airbags in passenger cars will raise vehicle prices and drive away potential buyers. According to R C Bhargava, Maruti Suzuki's chairman, 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. In a recently given interview to TOI, he further mentioned that small cars don't make much profit for the automaker and the India's largest carmaker will not hesitate from discontinuing the small cars if they become unviable. 

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 Rs 4 lakh - Rs 7 lakh segment, ruled by small hatchbacks. Providing driver and front passenger airbags in all cars is already mandatory and adding another four airbags will increase the cost by Rs 17,600, 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. "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". 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. It should be noted that the suggested rules for six airbags have not yet been finalised.

With inputs from Reuters