AMP 2026: Get the ecosystem in place first

Never mind that there are still two more years to go for the Automotive Mission Plan (AMP) 2006-16. The recent SIAM annual convention in New Delhi threw up a surprise with AMP 2026 described as ‘the collective vision of the Government and automotive industry’.

Some participants at the convention wondered why there was such a rush to get this new vision statement in place. Given that some important targets like the projected turnover of $145 billion will be missed, was there really a compelling reason to announce AMP 2026?

On the brighter side, this vision statement perhaps reflects India’s intent to be recognised as an automotive powerhouse, next only to China, during the course of this decade and the next.

The country is projected to produce nearly six million cars by 2019 which will make it the third largest after China and the US. China is already rolling out over 15 million cars from its factories and this number is expected to double by 2025.

The coming years will see a greater global role for India in the auto space (both in exports of vehicles and spares) thanks to its inherent strengths in costs and quality. Yet, there are constant challenges to cope with like road deaths, poor roads and growing traffic. A global auto power just cannot afford to turn a blind eye to these issues.

In addition, as demand for vehicles grows, it only puts an additional strain on the country’s fuel requirements. The import bill last fiscal was a whopping $150 billion.

Though things look better this year with crude prices cooling off to levels under $100/barrel, there is no telling what could happen in the near future. After all, it was barely six years ago when crude spiralled to $148/bbl and had the oil sector shell-shocked.

The Government has already deregulated petrol prices and it seems only a matter of time before diesel follows suit. For long, the auto sector has complained that there is no fuel pricing policy in place and this will help them plan better in the years ahead.

Companies could be hard-pressed otherwise to cope with unusual demand spurts which arise from artificial pricing. This was especially evident in 2011-12 when almost everyone queued up for diesel cars thanks to the fact that it was considerably cheaper than petrol.

It looks as if fossil fuels will continue to dominate the Indian landscape in the years to come unless the Government plays a proactive role in promoting alternative options. If electric cars have to become popular, there needs to be a roadmap in place which includes fiscal incentives and creation of infrastructure like charging points. Till these are in place, electric mobility will remain a pipedream.

These are issues which serve as a grim reminder of the obstacles ahead in AMP 2026. If some associates in the industry are cynical about the vision statement, they cannot be blamed. After all, constant policy changes have hardly helped their cause in an intensely competitive market.

Some of these relate to ad-hoc excise duty changes as in the case of SUVs which were slapped with higher levies during the fuel price crisis. The Government’s intent to make India a hub for small cars lead to generous excise duty sops which put other manufacturers at a disadvantage. Overnight, they found the market shifting towards compact cars and struggled to push sales of their more expensive mid-size offerings.

The transition to the new emission norms in 2010 which involved cleaner BS-4 fuel in metros had its share of problems both for the auto and oil sectors. While carmakers had to ensure a different product mix for different parts of the country, the oil industry had to pull out all stops to ensure fuel supplies. This was happening at a time when the public sector companies were in the midst of a liquidity crunch arising from the crude price crisis.

Going forward, AMP 2026 just cannot afford to repeat these mistakes. Times have changed dramatically since the time the first AMP was drafted and all talk focused on the country’s role as a small car hub. Today, it is the world’s largest producer of two-wheelers with production expected to reach 20 million units over the next four years. It is also moving rapidly towards the top slot in buses which will necessitate formulation of appropriate policies. New mobility solutions like the ‘quadricycle’ will also have to be reckoned with especially when it comes to addressing safety concerns. As the pressure on public transport grows across India, there will be an insatiable demand for cars and two-wheelers. This will need to be accompanied by supporting infrastructure like roads, bridges and flyovers.

The auto industry just cannot grow in isolation. It needs to survive in a healthy ecosystem which includes effective public transport, good roads, clean fuels, adherence to traffic rules etc. Till that happens, AMP 2026 will only remain a vision document on paper which would be unbecoming for a global power like India.

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