The Government of India is all set to make mobility safer with more and more regulations being mandated. The Bharat NCAP program is set to launch in 2023 and the 6 airbags rule is all set to kick in from October this year. This decision by the government is taken in light of the fact that road accidents are a major cause of death in our country. While some trends are indeed changing, even still a significant percentage of automobile buyers do not pay attention to safety ratings or wish to opt for lower prices than higher safety standards. This move by the government will surely increase the price of 4-wheelers but it will provide a higher level of protection and safety on the road. However, Maruti Suzuki is opposing this move by the government since this may cause the brand to exit the small car segment.
The Reason for exit
Small cars have a very small profit margin for car makers due to their low price. With the margins reducing day by day due to regulations, supply chain, and chip shortage issues, it wouldn’t make a strong business case for carmakers to sell small cars. As we all know, Maruti Suzuki is the leader in the small car segment with models like the Alto, S Presso, Wagon R, and Eeco.
These cars currently come with 2 airbags as standard to comply with the current safety norms. Adding 4 more airbags to these cars will drive up the cost significantly which would take away their affordability. This may also drive away many first-time car buyers who are upgrading from a two-wheeler. Even if Maruti decides to add 6 airbags, it will require major structural changes to the pillar to accommodate the airbags.
If Maruti doesn’t decide to add 6 airbags, it will have to stop selling these cars resulting in the carmaker losing a big chunk of its market share. Maruti’s Chairman RC Bhargava has made it pretty clear that the company won’t hesitate is exiting the small car business if the regulation comes into effect. It will surely be interesting to see how things pan out in the coming months and see if Maruti actually exits from the small car business.