[autohead115]

Ok, hear me out, I am torn between trying to choose a well put together car from Hyundai or going with TATA's that have noisy engines and jerky AMTs, or VWs that still don't feel as polished or nice (interior-wise) as a Kia/Hyundai; so I just wanted to understand the economics of using less steel/sheet-metal. Clearly our govt. is to blame for exorbitant taxes and no safety norms.

However, I wonder one thing, how much more would it cost to Hyundai or Maruti etc to make their car get at least 4 or 5 stars (ideally), I mean if TATA can do it with small cars as well (eg. punch), why can't Hyundai? If cars would cost 50K more to do so, I don't see why not, but does it cost a lot more? It's not like Hyundai is scared to price boldly, their top-of-the-line Creta is almost 23L OTR Bangalore now, I don't see people turning away if it costs 50-75K more. Can someone weigh in on this, what are the manufacturers thinking here?

[for_cars1]

Originally Posted by autohead115

Ok, here me out, I am torn between trying to choose a well put together car from Hyundai or going with TATA's that have noisy engines and jerky AMTs, or VWs that still don't feel as polished or nice (interior-wise) as a Kia/Hyundai .. what is the manufacturer thinking here?

Manufacturers bring out vehicles with increased active and passive(structural) safety due to:
1. Government enforcements on minimum safety and crash worthiness requirments if the vehicle can be eligible to be sold in the market in the first place.
2. Buyers who are safety aware resulting in more sales of vehicles with higher crash/safety ratings. Here there is incentive for OEMs to make safer cars if they sell well.


If there are more buyers who will go after "bling" factors rather than safety ratings and in the absence of adequate safety enforcements from Govt side, then it gives more incentive for OEMs to sell unsafe cars by giving few visible attractive features. On a large scale production, every bit of cost savings matter for the OEMs. Manufacturers are always thinking how to increase profits (ethically of course)

So points 1 and 2 listed above are key. If #1 is not in place, atleast buyers should ensure that only cars with high safety ratings are bought.

[Raghu M]

Biggest point to consider here is the regulations. Kia and other manufacturers abide by the laws in EU and other countries because the regulations mandate certain compulsory safety measures. In India, these manufacturers throw all of that out of the window and try to maximize profits. I think only the emission norms are strict here as we have a climate target to meet.

To put it simply, I don't think it will cost them a bomb to produce safer cars. They just don't want to do it because they are not obliged to do. You have a market for unsafe cars in India. They have the tech and R&D. It's all about utilization. How is TATA or for that matter M&M producing such safe cars at lower prices (compared to the Koreans - cost and maintenance)? To balance that, they add things like bigger infotainment screens, connected tech and bling. There is a occasional hue and cry about their crash test ratings but it hardly impacts their sales.

[ron178]

It is worth keeping in mind the cost of development too. Developing a five star car would need extensive simulations, internal testing etc. right from the ground up. Unless built on a global modular platform (eg. Kwid & Latin American Clio) it is very hard to improve overnight and would take significant R&D investment and a whole product cycle.

In terms of production I hardly think it would cost much per car to the end consumer, I don't know, maybe someone from the industry could clarify. It is just a little profit per car which multiplies when there is large sales volume. Save (say) $100 per car on welding or hot-stamping and sell 10000 cars a month and you've saved a million dollars with the consumer getting no benefits. Manufacturers will only improve if there is regulation (eg. minimum legislation applied in India since 2019) or fear of losing sales (can be induced by bad publicity from consumer-testing eg. Kia) or if the manufacturer decides to use consumer-testing results as a sales strategy (eg. Tata, Mahindra, Renault-Nissan) or in the case of global manufacturers to avoid embarrassment (eg. VW, Toyota, Honda).

It's still best to remember that one test cannot define vehicle safety and there is no such thing called a 'structurally safe' car, a car that performs better structurally in any consumer crash test is likely to perform better in a small number of similar crashes with specific crash partners and not much more (though some media try to portray otherwise). It is a conscious decision made keeping consumer-testing in mind, no manufacturer builds 'inherently strong' cars.

Originally Posted by Raghu M

Biggest point to consider here is the regulations. Kia and other manufacturers abide by the laws in EU and other countries because the regulations mandate certain compulsory safety measures. In India, these manufacturers throw all of that out of the window and try to maximize profits.

Not really, in terms of safety regulations India is now (since 2019) pretty close to Europe. We only don't have some of the later regulations, for example i-Size child seat anchorages, the ECE R135 oblique side pole test (introduced in Europe not too long ago) and intelligent speed assistance/AEB which I think come in next Wednesday in Europe.

The bigger reason manufacturers in developed markets try much harder is not regulation but to achieve a Euro NCAP five star/IIHS TSP rating which is much tougher than EU/US regulations. Though legally allowed a low rating can be a PR disaster and many fleet buyers also have a five-star-only policy. Sometimes even insurance companies refuse to insure cars that don't have a recent five star Euro NCAP rating. It's called 'pseudo-regulation'.

Hyundai have had a lot of negative press coverage over the past two years. There has been some subtle damage control on their part, for example in the i20 and Creta's GNCAP tests they shared all data required for the test unlike the i10 and Seltos, and they even sponsored testing for the Carens (presumably aiming higher). I am sure they are keeping the GNCAP/Bharat NCAP in mind while developing the next generation of products, just don't expect it to happen overnight because the Seltos (and twins) sold here is based on a completely different platform from the US/AU one so it would involve significant R&D and not just changing something on the production line. The i20 on the other hand could reach four stars with a different airbag or maybe even a software update.

Originally Posted by autohead115

I thought Seltos and Creta were all international models, and it just feels like they are skimping on sheet metal.

No the Seltos we get here is a short-wheelbase version of the Chinese Kia KX3 and not related to the 'original' Seltos codenamed the Kia SP2. The KX3 was originally developed as an LHD-only model which probably explains the pedal movement problems in the RHD version.

Originally Posted by autohead115

They sure look the same.

That was the goal.

Originally Posted by autohead115

I wonder if someone sitting behind the desk and thinking, "hmmm, 50K INR of high tensile steel huh?

Costs probably far less than that. Also those UHSS members in the leaked BIW diagrams for the SP2 seem to be for the IIHS' small overlap test. The decision would have (vaguely generalising here) probably sounded more like "the market for higher-rated cars in India is small so no need to invest in the R&D". Of course this was 2019 when the Nexon's result was still very new so hopefully they've learned since then although their history in Latin America suggests otherwise.

[autohead115]

I thought Seltos and Creta were all international models, and it just feels like they are skimping on sheet metal. Are you sure they are not the same as in other countries? They sure look the same. I wonder if someone sitting behind the desk and thinking, "hmmm, 50K INR of high tensile steel huh? Let's skip that and pass on the benefits of structurally unsafe care to India, as they are obsessed with prices and sales would take a hit". Didn't they get enough data from the success of TATA Nexon? Do they really think their sales will take a hit if costs go up by that much?

[sheelapratosh]

I don’t think it’s very complicated.

But the world works based on demand/supply. When did we have “waiting periods” for a car?��

Many of my educated friends are ready to pick up a Creta Vs any Tata just based on what features they value most in a Creta. I have nothing against Creta. But some of them pick up a car just because of a perceived value.. May be a friend of them has the car and they like it.. sometimes it is as simple as the name - some of them are happy with music system. Few don’t even know the horse power of their car. We are a tiny group of enthusiasts compared to the actual world which determines the direction taken by these companies.

Regulation works. But what kind of regulation? If government insists 6 airbags, they will make cars with 6 airbags. But that doesn’t solve the crash test rating issue.

Like someone mentioned above, what customers want is what sells.

[amit_mechengg]

What a timing, just yesterday there was a finding

https://www.powernationtv.com/post/c...whose-is-safer

Global NCAP announces the results of a dramatic Car2Car crash test of a Hyundai sold in Mexico & a comparable Hyundai in the US which demonstrates the double standards that apply to vehicle safety across national borders.

Full video:

https://youtu.be/2eGpXyAQzuU

#NoZeroStarCars

[thanixravindran]

Apart from the product BOM cost and R&D cost, the other important element is Capital expenditure related to the tooling and fixtures. It's not easy to swap out high tensile and ultra high tensile steel just like that in a tool.

Any product/project has to submit project financials at the early stages in the product life cycle development. BOM cost impacts the Gross margin as well influence the cash flow through cost of goods sold. So it is better to keep it as low as possible when the volume is fluid. R&D, expenses costs and capital expenditure costs influence the other financial parameters like payback, NPV and IRR which are also scrutinized heavily. R&D costs are typically expensed till development stage but capital expenditure is amortized and depreciated over the asset life which means they stay in the books of company and influence the P&L for years to come. So product companies are very careful about Capex and it is often set by the top management with strict approval and review rigor.

Once you complete the project, it is not easy to add any capital expenditure like new tooling to improve the product. It is very easy to plonk air bags in lower variants as inserts are already available in the top variant and hence no change in tooling.

[IshaanIan]

I am not an expert but I feel it is pretty straightforward. It's not about how much more it would cost to make a structurally stable car; It's about what can we sell and how much can we make on it. That is the mentality that is employed.

Let's say a manufacturer wants to launch a model that they already sell in other markets, here in India. If they are a manufacturer with a good reputation by which I mean reliability since that is most important in a country with cheap labor where maintenance will not occur well and roads will be horrible, they can strip away as much as they feel they can save on, and price it as high as they think they could sell it.

Now Tata is a company known for poor reliability in the consumer car sector, therefore they need to set themselves apart from the established brands. They achieve this through attractive design which is the easy bit, and back it up with some substance in the form of categorically safer cars since that is all they can afford to muster up at the moment as they have no solid petrol engines which would be way more expensive to develop. That's just what they know they have to do to not only pull customers away from the top players but to also make up for the bad reputation they suffer from.

[Drlmtukkar]

For once i see a change in attitude. People are going for safer cars. And should i mention going for Indian Cars. Heck, all that the Koreans are doing is selling BLING!!! I’ve driven a Seltos, Crata and Nexon back to back and the difference in build quality is noticeably better in the Nexon hands down. For that matter, even all Mahindra products are well built. I’ve got 4 car garage with all Indian cars and I’m take pride in buying Indian cars.

People around still keep telling me - ‘hey man you can easily afford any German brand but why these Tata’s and MM’s’. My answer is simple - when you have home grown products that are almost up there with the best - why not support them.

Be Indian. Buy Indian. Please.

Our home grown products are far, far better than any Koreans, who are here only for profits. And yes not to forget “MG". I really don’t understand how can we Indians buy Chinese products that are so quirky and all bling bling bling; ah, it’s shameful.

BUY INDIAN. END OF STORY.

[Revvman]

I think it's a combination of factors why we don't really have many options in the "solid build" quality segment, whether hatchbacks or above and I'm not just talking about NCAP ratings, but really solid build quality:

- Relative to the global industry, ours is still a growing, evolving market which like any other industry, is being shaped by the market demand and supply factors. For too long the Indian consumer's car selection has been made solely on the cost factor which was recognised and exploited by the likes of Maruti and Hyundai to the hilt. Notwithstanding the fact that Indians didn't appreciate solid build quality cars like Indigo, Vento or Ecosport, but only if they were priced right.

- Global manufacturers, especially continental ones like Ford, Renault, Skoda (prior to India 2.0), GM who've always been known for their tough build quality DNA, failed to keep up with times in terms of offering viable, tech upgraded options. Ford for e.g., after literally creating a new class of "Urban SUV" vehicle by launching Ecosport, failed miserably in taking advantage of their first mover advantage and gave the entire space on a platter to the likes of Creta, Seltos and Brezza. IMO, not launching the Ford Territory in time was a big miss on their part. Similarly, GM never followed up on the stupendous quality of Cruze by any better offering or Renault in the case of Duster for that matter.

- Marketing, Visibility and Public Consciousness - I don't think the concept of good build quality has ever been discussed or promoted in public domain as much to have an impact on the car buyer's psyche, maybe primarily due to the fact that the whole marketing game in automobiles is supported by the Koreans and Japanese and the likes of others never really bothered. If one cannot "feel" the difference in build quality, he/she can never appreciate the value of it. Try closing the doors of Ecosport and Seltos at the same time in the same order and you'll know what I mean.

All in all, in today's cost competitive, corporate world, only public awareness and demand for good build quality will push car manufacturers in offering us better options. Till then, I guess we'll need to find our best option amongst whatever the manufacturers' offer us.

[AROO7]

Originally Posted by autohead115

so I just wanted to understand the economics of using less steel/sheet-metal. Clearly our govt is to blame for exorbitant taxes and no safety norms.

Why do manufacturers skip on providing safety?

To answer your query let me take you back to the land of none other than Uncle Sam. This happened in 1978 when a Ford Pinto was rear-ended and its gas tank exploded causing death by burn to one passenger and permanent disfiguration to another. At that time US safety laws were lax somewhat similar to what we have here in India. Ford was on a tight timeline to quickly bring the Pinto to beat Chevrolet. In the process, it knowingly skipped the part to make the gas tank secure in case of a rear collision. The reason behind this was the ROI. Yes, Ford figured if an accident happened it would be cheap to pay the damage and attorney fees than to add that feature and delay the launch of the car. That's what exactly happened when the family filed a lawsuit Ford had to pay a measly sum to be done with it.

Why (some) carmakers in India don't make safe cars?

From the above example, you can see companies always focus on profit and it's only when the regulation or the public purchase decision shifts toward safer cars there is an incentive for them to make cars safe. Now since you are talking about Hyundai let me take you back a little in time. In 2010 Hyundai came with the i20 which was NCAP 5-star safety winner but that product flopped. While during the same time i10 (zero stars in NCAP) sold in big numbers. The price difference you ask, a top variant of i10 was similarly priced to a second-top variant of i20. The difference was that the latter had more safety features and a heavy and structurally sound body. After that, we also made sure Hyundai's global products like Sonata, Elantra, Tucson, and Santa Fe which were genuinely good products were a flop. But its cheaper offering for India like Santro, Accent, and Verna were a success. That's when we Indians taught Koreans and many other carmakers that we prefer gizmos and less prices over anything else including safety.

Present car scenario in India towards safety-

Now the narrative is being tried to be re-written by Indian car companies but still overpriced and barely 3-star Koreans with unstable bodyshells sell like hot cakes. So unless government cracks a whip on these carmakers, I don't think Indian buying preference can anytime soon compel them to make safer cars.

Cost involved in making an unsafe car safe-

Finally coming to the cost metrics of adding safety features. In decreasing order of the cost involved you can have the R&D, cost involved to make structural changes, machine re-tooling, and other overheads followed by the cost of equipment (like extra airbags, sensors, etc). Except for the last part, all the other costs are substantial. And if all the cost is passed on to the customer then the car (entry-level) prices will go up. Because the margin is already very thin on them. The best example of that is MSIL's Mr. Bhargava's statement (making small cars will be unviable with stricter safety regulations) and Hyundai abruptly stopping the production of Santro.

How do Indian brands make affordable but safe cars and not other established brands in that segment?

I know reading the above statement will create confusion as people will say Tiago (Tata's cheapest car) is a four-star. Here one needs to understand while making Tiago, the only way to differentiate its product from Japanese and Koreans was safety. So they made it structurally sound while skipping on a couple of features and a better powertrain. On the other hand, MSIL differentiates itself with its mileage, affordable and good ASS experience while Hyundai does it with feel-good features and a slightly premium image over MSIL.

The same argument can be extrapolated in the case of Mahindra XUV700 which has disruptive pricing. Here the product is safe but Mahindra is for sure making a loss on entry-level models. Another reason why XUV700's feature spread is such that it compels you to get the higher variant (where the company actually breakeven or makes a profit).

[anb]

Originally Posted by amit_mechengg

Global NCAP announces the results of a dramatic Car2Car crash test of a Hyundai sold in Mexico & a comparable Hyundai in the US which demonstrates the double standards that apply to vehicle safety across national bord

#NoZeroStarCars

I think GNCAP should crash test Mexican Verna with US Verna/ Accent and not between two different models like Aura and Accent.

[dust-n-bones]

Originally Posted by Drlmtukkar

Be Indian Buy Indian. Please.

While I agree Indian brands have come a long way (I drive an Indian brand as well), making safety a nationalistic argument doesn't seem correct. Foreign brands may be here for the money, but no brand is here for charity - Indian or otherwise.
Also, the reason Indian brands have had to revamp their strategy and portfolios towards safety is because the foreign brands have pushed them out of the volume and bling segments. Were it not for the competition, you would still see them selling the nanos, scorpios and indicas.

When you buy 'Indian', please be aware that from design to delivery, you get a product of the global supply chain. India is becoming an important part of that supply chain and we should be proud of the fact, rather than withdraw ourselves in an emotional appeal.

[i74js]

I fully agree that global platforms / modular platforms can generate a better safety results and companies can adopt it across markets. I read members talking about how Hyundai can actually make the recovery from customers for a safer car.
I believe we all would assume that the profit per car will remain same (with or without higher safety rating)
Look at it from the working capital requirement. Let’s assume the upward costing of a safer car is INR 50,000; this will be the additional working capital requirement for every car that is manufactured. Typically, between placement of component orders with ancillaries, stamping of parts and finalisation of white body and revenue realisation from sales takes about 7 months for fast moving inventory and about 12 months for slow moving vehicles.
The commercial lending rate is about 10.5 to 12 % even today. Assuming 6000 cars are manufactured every month, with 7 months as payback, one can do the estimation on additional capital required for a company with same market cap. Now if we do the same calculation for a player like Maruti Suzuki, the impact would be even more as the production is far higher for them.
Unless pushed by regulation, it is difficult to make companies yield as they are here to protect the shareholders value and will continue to do so.