Auto industry in a tizzy over small car rule

The automobile industry could hit a speedbreaker over the definition of a small car. Manufacturers are worried about a possible change in specifications announced by the finance minister in the budget last year.

His small car dream is caught in controvery - over the definition of a small car. According to the Auto Policy 2002, cars 3.8 metres in length or less irrespective of the engine size, qualify for the small car status. But after Budget 2006, the small car definition was changed to any car with a length of 4 metres or less and engine specifications were added.

For petrol run cars, the engine size should be less than 1.2 litre and for diesel run cars, the engine size should be less than 1.5 litre. The big winner has been Maruti, as all its small cars qualify for the excise benefit. But heavy industry ministry sources say that the government is planning to revert back to the old definition, leaving manufacturers like Hyundai in a sticky spot.

Minister, Heavy Industries, Sontosh Mohan Dev told CNBC-TV18, "Manufacturers are confused and worried." Others like General Motors who delayed the launch of their small car Aveo UVA to avail of the excise benefit, also stand to lose. GM says this move is retrograde and will hit investor confidence. While the industry is up in arms, the market leader Maruti has no cause for concern. All its models - the 800, Alto, Wagon R, Swift and even the new Zen Estilo qualify under the old definition.

Car manufacturers like Hyundai and GM have written to the government about this policy change. Interestingly, the draft Auto Policy 2006 did not define a small car. The controversial definition was inserted into the final policy.

Swati Khandelwal