NEWSLINKS
MILLENNIUM- FEATURES
INDIA & THE WTO
NEW GOVERNMENT
COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES
SEARCH REDIFF

Business Commentary/Pritish Nandy

Five myths about second hand cars

There is a huge storm brewing over the proposed import of second hand cars. The car manufacturers are obviously furious and it is particularly amusing to watch the multinationals like General Motors and Ford rave and rant against the proposal. They sound exactly like the Birlas and Doshis did when the government opened up the passenger car sector to a rush of new players and, all of a sudden, it was no longer sexy to be the privileged owner of an Ambassador or a Premier Padmini.

The arguments being offered are many. But let us look at them, one at a time, and see if they pass muster.

Argument one: Second hand cars will kill domestic car makers and put thousands out of jobs.

Yes and no. If domestic car manufacturers cannot compete, they will obviously have to down their shutters. But that is going to be true for every industry now. If you cannot produce quality steel at the right price, you will have to shut down. If you cannot produce television sets or audio systems at the right price and the right quality, you will have to shut down. Quality and price will determine your survival in the future, irrespective of what business you are in. So why should car manufacturers in specific get protection when everyone else is having to fight competition head on? Is this because the auto industry has always enjoyed special protection, even when it was producing fourth rate products for four long decades and forcing the nation to buy them? Is this why it believes that it has a special mandate to cheat consumers?

By that argument, we should go back to Ambassadors and Premier Padminis. They were so shoddily made that the moment you bought them you started looking for auto mechanics and garages to repair them. This ensured a huge employment potential which died the moment international brands came in and you could buy cars of reasonable quality and durability off the shelf. They put out of business hundreds of garages and thousands of mechanics. But should we shed tears for them and persist with rotten cars and greedy, exploitative local businessmen who have looted India in cahoots with a corrupt political establishment for almost half a century in the name of swadeshi? That is the moot question.

More second hand cars will open up new job opportunities. If not in the manufacturing sector, certainly in the services sector. Those unemployed will have to only re-train themselves. That is all. And that too if the prophets of doom are right and some of the automakers actually end up downing their shutters. My guess is none will. The Indian market for cars is big enough to accommodate both new cars as well as second hand imports.

Argument two: From a manufacturing economy, we will (at this rate) soon become an importing economy?

Big deal. Many of the world's biggest economies, like Japan for instance, import goods they cannot produce at the right quality and the right price themselves. They pay for these imports by producing goods they can make at the right quality and the right price in enough quantities to export them.

Let us admit it: We do not need to make cars if we cannot make them at competitive prices and competitive quality. In that case, we might as well import them. There is no loss of face in this. It is a simple matter of economics. Demand and supply. Price and quality.

Argument three: More second hand cars on the roads will mean more pollution.

Rubbish. Till recently, when the courts intervened, car manufacturers in India were least concerned about pollution. They were forced to set their technology right when the courts insisted on their following international pollution norms. All India has to do is make sure that the second hand cars being imported are consistent with the same pollution norms. Once they conform to the standards we have set, who cares whether the cars are new or second hand!

In any case, many of the so-called manufacturers today are simply bringing in kits in knocked down condition and re-assembling them here, pretending that they are actually manufacturing world class cars out here. The fact is: They are not.

Argument four: Cheaper cars will mean we will clog up our roads even further and make life a disaster for those who cannot afford cars.

That will happen in any case. Our infrastructure is inadequate to sustain the number of cars that are getting onto the roads every year. But that does not mean you can cap individual aspirations. Thousands of two-wheeler owners are converting to cars every year. Thousands of public transportation users are also doing so simply because the public transportation system is totally inadequate in most cities to meet the needs of the burgeoning population.

We must improve the public transportation system first if we want to keep cars in check but, frankly, even that will not work because more and more Indians are doing better every year and are looking for a better quality of life. So they will definitely buy more cars like they are buying more fridges, more television sets, more audio systems. So the only way to contain the car population on the streets is to limit the number of cars a person can own.

Unlike in the West, in India this will make only a notional impact if any since most new buyers are actually first time buyers or corporates who are giving cars to people who refuse, once they reach a certain status in their jobs, to depend on the vagaries of the public transportation system which is, at its best, unpredictable and, at its worst, killing.

Second hand cars have no special role to play in this deterioration of our traffic conditions. We, as a people, do not like to waste. So, when we buy second hand cars, I am sure we will keep them well, look after them and run them far better than anyone anywhere else in the world would have. Without paying excessively for the brand value of the car as we do when we buy new cars. The longevity of cars in India, whatever their original quality may be, is reputed to be the highest by far and the ability of Indian mechanics to keep any car on the road, irrespective of age and brand, is by now globally acknowledged.

Argument five, the final argument, is the real one: What happens to all those Indian and foreign car manufacturers who have paid so heavily to the political and bureaucratic establishment to protect their interests over the years?

Simple. They lose out. They realise that India is moving towards greater transparency, a more open and a more liberal economy where you cannot have a different set of rules for different pressure groups who believe that they can pay their way out of every crisis. The time has come for rules that work equally for everyone.

The time has also come to realise that the Indian consumer class, reportedly three hundred million strong, has the right to be treated on par with the rest of the world. He cannot be cheated, bullied, harassed and looted just to protect the Indian business community and, now, their firang cronies.

From The Rediff Archives

Second hand, top gear: The market for used vehicles thrives in confusion

FIPB rejects Tata joint venture's plan to trade in second hand cars

Auto-makers seek protection by way of higher tariff on vehicle imports

Bibek Debroy on why imports of second hand cars need to be permitted

Ford to increase presence in second-hand car mart

Pritish Nandy

Business