Why the entry-level car prices may rise 10% from 2017

The prices of entry-level cars could go up by a steep 10 per cent once the manufacturers install safety features such as airbags and anti-lock brake system in all cars by 2017 to meet the mandatory crash test requirements.

According to a recent government notification, cars of all new models will have to meet the minimum frontal and side crash test as well as pedestrian protection test from October 2017.

Existing models, however, will have a grace period of one year to meet side-crash test norms and two years for frontal crash test.

The frontal crash test would be done at a speed of 56 km an hour, while the side-crash test is to be carried at a speed of 50 km an hour.

An executive with a leading car manufacturer said the cost for entry level vehicles could go up in excess of Rs 30,000.

“If you introduce airbags and ABS while strengthening the design in entry level cars that are priced at Rs 300,000-500,000, the cost should go up by 10 per cent.

"For most of the sedans, the increase will be minimal since they largely meet such safety requirements.”

Vishnu Mathur, director-general at the Society of Indian Automobile Manufacturers, says the cost to industry will go up.

“Whether the companies choose to pass on this hike or not is a call they will have to take.

"For models that lack structural compatibility to add these features, a lot of engineering will be required.”

India, accounting for about one per cent of the world vehicle population, is home to 15 per cent of all traffic fatalities, say World Bank estimates.

According to data from the Ministry of Road Transport and Highways, 78 per cent of road accidents in 2013 took place due to driver’s fault, while two per cent of accidents took place due to fault of the pedestrian.

Another 1.9 per cent accidents were caused by defect in condition of motor vehicles.

“The industry as well as government expects the customer to recognise the value of these additional safety features. Generally speaking, depending on the model or platform, there will be cost escalation,” said C V Raman, executive director (engineering) at Maruti Suzuki.

He said the company would meet the frontal and side impact regulations in time.

The company has also set up a ‘Crash Lab’ in Rohtak even as government infrastructure is under works.

Most industry players are gearing to meet the mandatory norms.

Rakesh Srivastava, senior vice-president (sales and marketing) at Hyundai, says safety is a prime concern and his company is confident of meeting the deadlines.

The additional cost will vary from model to model, he adds.

According to Srivastava, safety is not a function of these additional features alone.

“The challenge lies in ensuring there is a supportive road infrastructure and the driver and pedestrian are educated adequately.

"Then only can we achieve the desired result.”

Raman says that no amount of safety equipment or regulations can help in case the occupants do not follow simple traffic rules.