Domestic-Foreign division in Siam

The Indian auto industry is divided with deep cracks appearing between the homegrown and foreign carmakers. Over the last few months these differences have only intensified. At the heart of the controversy is the continued demand from the players such as Mahindra & Mahindra, Tata Motors and Maruti Suzuki for high tariff on imports to protect their investments in the country.

This was evident in the way industry lobby group Siam, which is headed by M&M president Pawan Goenka, responded to the moves to lower tariffs in the proposed trade agreement between India and the European Union.

While Goenka struck a protectionist move and opposed the move which would have lowered the duty on imported cars, foreign makers supported duty reduction. Senior officials from Audi, BMW and Mercedes openly took a line different to that of Siam, arguing that the domestic industry needs to shed protection if it wants to be globally competitive.

Then, Siam decided to ignore the new definition of completely build and completely knocked down cars, proposed in the Budget, along with changes in the duty structure. The government decided to fix customs duty on CKD-assembled cars at 30% against 10% before the Budget. On February 28, Siam feigned complete ignorance saying it was yet to study the proposal. Government officials, however, say that the revenue department had consulted the auto industry last June.

The situation was much the same last week, when the Delhi government decided to slap additional levy on diesel vehicles. Siam issued a statement criticizing the move. While Siam officials said that automakers are putting up a unified front, industry insiders said in private, "It is a divided house at Siam."

Siam was again criticized by many of its constituents for the "shoddy manner" (as many described it) in which it organized the Delhi Auto Expo, for which it has industry body CII and component makers body ACMA as joint organizers. Siam was accused by many of its constituents of mismanagement, poor organization and lack of coordination.

Companies said their CEOs and MDs had to slug it out in long queues as there was no proper arrangement for them to enter the venue. "And this despite our paying such exorbitant fee to the organizers. We had to ask our senior officials, many of whom were from global headquarters, to avoid visiting the expo due to such shortcomings," an official of a German company said. "It has been an agonizing experience for us to participate at the Delhi Auto Expo," a senior official with a Japanese car company said, on condition of anonymity as nobody wanted to anger Siam by airing grievances in public.

Many of the foreign constituents of Siam are also not satisfied that the auto body has not raised crucial issues like an official recall policy for Indian automakers.

However, Siam does not agree. "Siam works on the basis of consensus. In order to generate a consensus, often the individual interests have to be viewed from the perspective of overall industry interest. In any such activity, the decisions are based on the highest common factor rather than the least common denominator," said Sugato Sen, a senior director. He said Siam had pushed for lower duty on CKD that saw it getting reduced from 60% to 30%.

On criticism of the auto expo, he said, "We are all aware of the shortcomings of the venue at which this show is held. The organizers have to bear with the constraints of the venue which can sometimes be overbearing for the organizers, exhibitors as well as the visitors."