India to soon to have a formal auto recall policy in place

With the Indian automobile industry set to break into the league of top five car markets by 2016, the government is working on a formal auto recall policy to improve manufacturing standards in the country, a top government official said.

“We are setting up a National Automotive Board (NAB), which is already on the anvil and will be formed in two-three months, that will be able to take action on a recall,” said Ambuj Sharma, joint secretary, department of heavy industries.

“We are still examining its prospects and discussions have happened on the set of guidelines to be adopted. We are also considering whether to penalize a manufacturer in such a case.” He declined to give a timeframe.

Sharma said NAB will have representation from all the nodal ministries and automotive bodies such as the Automotive Research Association of India (ARAI).

Projects such as the one on National Automotive Testing and the R&D Infrastructure Project (Natrip) will fall under its purview.

Sharma said that a recall policy would have to be included under the Motor Vehicles Act as it requires consent from other transport-related institutions in the country.

Another official in the department of heavy industries, who did not want to be named, said that the government was trying to draw up a policy similar to that of the US-based National Highway Traffic Safety Administration that requires for a manufacturer to issue a public notice if a manufacturing defect is confirmed.

The Society of Indian Automobile Manufacturers, an industry lobby, was not aware of the development.

The move comes at a time when auto makers in the country, especially the home-grown ones, add safety features to their cars or motorcycles after receiving complaints from customers while insisting that such efforts do not constitute a recall.

In November last year, Tata Motors Ltd decided to install additional safety features in at least 70,000 Nanos if the owners wanted them following instances of the car catching fire.

Since the Nano’s high-decibel launch in March 2009, there have been six such known incidents. The company said that these “efforts do not constitute a recall”.

Similarly, Mahindra and Mahindra Ltd, which entered the motorcycle segment in September last year with its 110cc Stallio, had to suspend production as certain parts of the bike required fine-tuning and adjustments were needed to some of the bikes on the road.

Such incidents have increased in the Indian market. Honda asked owners to bring their City sedans back twice in a year.

Maruti Suzuki India Ltd, the country’s largest car maker, did so for some of its diesel vehicles to check and replace a faulty engine part, the second such step by the company in about 18 months.

The move will make the market more mature, experts said.

However, they are sceptical about consumer acceptance of the concept.

Recalls have both a positive and a negative impact, said Surjit Arora, a sector analyst with Mumbai-based brokerage Prabhudas Lilladher Pvt. Ltd.

“In India, while such actions are perceived as negative, globally, it is the other way around,” he said. “People take these incidents positively. They are happy with the fact that the company reviews the products, which it sold two-three years ago.”

Such processes are backed by a proper legal framework in the West, said an expert with a leading consultancy.

“It’s the coming of age of the Indian market. It will give customers a right to go back to the manufacturers and ask questions,” the expert said, requesting anonymity.

Earlier this year, the Sunder committee tasked to update the Motor Vehicles Act 1988, had recommended in its report “punishment for offences relating to manufacturing of faulty vehicles” of imprisonment of up to three months and/or a fine of up to Rs. 1 lakh.