New Delhi: The fate of one of country’s biggest selling cars–Alto, might be uncertain as India’s largest carmaker Maruti Suzuki India Limited (MSIL) has reiterated that the rule for mandatory six airbags will have a major impact on the cost and subsequent demand scenario for entry level cars.
“I don’t even know if six airbags will fit in the small cars because they are not meant for small cars. We will have to find that out. It will certainly be another setback to the sales of small cars. Putting four extra airbags would be a substantial cost,” RC Bhargava, Chairman, Maruti Suzuki told ETAuto on the side lines of the agreement signing event of Maruti’s new plant in Kharkhoda on Thursday.
In January this year, the government issued draft guidelines requiring all passenger cars from October 1 to be fitted with mandatory six airbags, including four passenger airbags and two side airbags. The notification is a constructive step in the direction of car occupants’ safety. But it hurts the industry as the price sensitive entry-level car market, where even a minimal increase in acquisition cost impacts the user’s car buying decision, will be the most affected.
Price sensitivity
“The airbag proposal is a good step towards passenger safety. However, the cost and feasibility may not allow all existing models to be upgraded,” Ravi Bhatia, President and Director, JATO Dynamics India, said.
Along with several other factors, one of the reasons for country’s second largest carmaker Hyundai Motor India to recently pull the plug on its Santro hatchback was also the non-viability to invest in making low volume models comply with the upcoming safety regulations.
Maruti Suzuki, the leader in the small car segment, offers entry-level hatchbacks like Alto and S-Presso. Similarly, if the volumes for the Alto hatchback dip significantly, the cost of compliance of six airbags does not fit right and the price elasticity hurts its consumers, India may have to bid adieu to one of the top 5 selling cars in the country, which also grabbed the No.1 position for 16 years until FY2020.
Over the course of five years the domestic sales of Alto which is priced at INR 3.39 lakh, has declined 44% in FY22, compared to FY18.
Engineering feasibility
Currently, two airbags are mandatory in all the vehicles – one for the driver and another for the co-passenger next to the driver’s seat. For the driver’s seat, the airbag rule was made mandatory from July 2019 but the one for the co-passenger’s seat came into effect from January 2022.
“Moving from one airbag to two airbags was relatively less complicated for the industry given the location of the second airbag. However, moving from two to six will require modifications to be made which may not be feasible or financially viable in all cars,” said Bhatia of JATO Dynamics India.
The industry sources are of the view that the Government is firm on moving the draft notification forward despite the resistance, but after some accommodation of industry concerns.
Meanwhile, many of the new models that are being manufactured for the country are being made with the scope of accommodating six airbags.
According to a study by JATO Dynamics, the price impact of additional four airbags on a B-segment SUV would be approximately INR 17,600.
An airbag is an inflatable cushion designed to protect the passengers in a vehicle from any major injury during a serious collision. A typical airbag consists of an airbag module, crash sensors and a diagnostic unit. It uses a canister, which contains sodium azide (NaN3) powder that blows up when the airbag explodes.
The first phase of the new plant will commence from 2025, followed by the second phase in the later part of 2026. The plant is built for expansion to meet the demand in the domestic and exports market. It will not cater to making EVs.
Addressing a virtual earnings call conference, Bhargava said over the last three years the market at the lower end, for people who either use two-wheeler or use entry level hatchbacks for commuting, has been shrinking significantly.
