Jolt to Make-in-India in automobile sector

Dealing a severe blow to Prime Minister Narendra Modi’s “Make in India” programme in the automobile sector, German luxury car maker Mercedes-Benz said on Wednesday that it has put on hold investments in India due to a ban imposed by the Supreme Court on sale of larger diesel vehicles in Delhi-NCR.

The company said that the issue has put a question mark on the country’s credibility as an investment destination for the automobile companies.

“Most of the decisions are postponed rather than completely cancelled. If the ban continues, then certainly cancellations will come into play,” said Mercedes Benz India managing director and CEO Roland Folger.

He termed the current uncertain situation surrounding diesel vehicles as a “lost opportunity for India”. “When we came to India, it was perceived as large potential market with very continuous, reliable growth. These things (the ban and higher taxes on diesel vehicles) have stopped that,” said Mr Folger.

Society of Indian Autom-obile Manufacturers (SIAM), which represent the auto industry in the country, said that the issue may even impact India’s emergence as the global hub of automobile manufacturing. “There are many markets where diesel vehicles are exported. If diesel engine development is stopped in India it will impact exports,” SIAM deputy director general Sugato Sen told this newspaper.

He said that lot of companies are saying that their entire investments have become questionable after the ban on sale of large diesel engine vehicles and there is lot of confusion in the market. He said that ban on diesel vehicles is a “strong statement” from policymakers that diesel engines are not desirable in India and this creates uncertainty as companies investing have to look at their bottomlines also.

Price Waterhouse partner and auto expert Abdul Majeed said a sudden ban on diesel vehicle has put pressure on the industry as they invested looking at the current laws of the country. “Many companies are holding up their investments. They invested in diesel technology expecting a huge demand. This sudden change will put pressure on them and they will not be able to convince their parent companies to invest in the country,” he added.

He said that if this issue is allowed to linger for a long time than companies will think twice before investing in India.

After banning registration of bigger diesel cars and SUVS in December last year till March 31, the apex court has extended the ban until the next hearing in July.