[1.2TSI7DSG]

You can read the history of this rule in the relevant thread

https://www.team-bhp.com/forum/india...0proper%20boot (10 years of the Small Car rule (<4-metre, <1.2L petrol, <1.5L diesel) : Has India benefitted?).

Million Dollar question

Is it still relevant?

Pros:
1. Keeps the Indian Manufacturers competitive as most of the global platforms are now 4.2 m (eg Polo/Ecosport etc)
2. Forces us to push for more power from smaller engines (1.0 l engines that made 50 HP are now touching 90-100 HP, Diesels like 1.4 on 54HP indica is now a 1.5 on the nexon with 110? hP today)

Now the same pros are cons for a petrol head community like us.

No access to big engines on small cars/ No globally competent cars etc.

Also the recent threads on the dying small car segment makes me question the validity of the rule today.

1. It is still creating value?
2. Are we willing to pay higher for a 4.2 m car?
3. Are we willing to pay higher for a 1.4 p engine in the small car segment?
4. Does the lower duty actually make you buy a car that fits the sizer over something that doesnt?

So what would you do?

[GTO]

Thread moved from the Assembly Line to the Indian Car Scene. Thanks for sharing!

Going to our homepage tomorrow / day after

Don't underestimate the power of sub-4 meter cars and how the lower taxes affect pricing. Case in point = In October 2023, sub-4 meter cars accounted for around 2.5 lakh sales & its a similar story in most months!

[Maky]

Originally Posted by 1.2TSI7DSG

Is it still relevant?

I am a fan of small, easily parked, easily maneuverable in the city sub-4m cars.
I am not a fan of sub-4m cars receiving tax benefits, which then leads us to getting compromised cars.

In some rare cases newer generation version of old sub-4m cars that now won't be launched because they now enter a tax bracket which makes them uncompetitive.

[bijims]

If you look at the top 25 best-selling cars for February 2024, you can make out that small sub-4 metre cars still rule the market, with over 15 of the top 25 belonging to the sub-4 metre segment. Indian manufacturers also try their best to make them fit under the lower tax slab by opting for sub-1.2-litre petrol engines/sub-1.5-litre Diesel engines and other criteria as well.



As you can see in the chart above, cars like Baleno, Fronx, Sonet and Venue which are all sold with 1.5-litre petrol engines abroad are offered with 1.2 litre naturally aspirated or 1.0-litre turbo petrol engines here, just to get the benefit of the lower tax slabs. Moreover, the Venue is just over 4 metres abroad at 4040 mm and the Sonet at 4120 mm, they have been redesigned to fit under 4 metres as well. The tax benefit makes a huge difference as otherwise these cars would be priced too close to their larger counterparts, in the current scenario itself there is a huge overlap, if not for the favourable tax slab, this would have been worse and it wouldn't have made much sense for these sub-4-metre cars. So to keep prices and sizes of cars in check (due to the increasing traffic and large number of cars on the road), the sub-4-metre rule is as relevant today as it was when it was first introduced.

[V.Narayan]

An excellent and controversial subject for a healthy debate.

IMHO the sub 4-metre rule remains completely relevant to India and shall become more so as our car numbers increase. In order to accommodate a larger number of cars for our growing middle and lower middle class we need the 4-metre rule and I dare say a sub 3.6 metre rule t.oo.

I always thought that given our historical narrow city roads and dearth of parking maybe we should have had 4 tax segments – (i) below 3.6m, (ii) 3.6 to 4.0, (iii) above 4.0m and a ban above 4.5m. Cars above 4.5 metres in length ought to be not allowed in India. Plus a punitive rate on engine size above 1.5 litres. We have lost perspective on what engine bhp is needed to lug a family of four around at between 20 to 80 kmph - that's the speed range most cars stay in for over 90% of their running time I guess - a few long run enthusiasts may differ.

Look at cars in the 1950s to 1970s in Europe and you'll find engine outputs of between 40 bhp to 70 bhp region. We now think we need 1500cc, 2000cc and 2500cc engines which mainly appeal to the ego and the sense of power. I think what GoI did is right. I only regret they didn't do more.

The sub- 4 metre car and associated tax benefits will remain a part of our landscape for several reasons - (i) the market needs more affordable small cars to address the aspirations of the lower middle class moving up. (ii) our road infrastructure in our crowded old city areas cannot cope with 5-metre cars or even 4.5-metre cars; same for our parking availability. And given that we are the most densely populated large country this fact isn’t changing for another century though better roads and planning will help but cannot alleviate the issue.(iii) smaller cars = smaller engines = lesser fuel burn = lower oil imports. The delta that a few million small cars contribute to Forex savings might be limited but every step counts.

I realize my pro-Govt views on sub- 4 metre cars flies against the winds of opinion that blow at Team BHP.

D-BHPian @pqr who writes some of the best and most indepth threads has one on this subject.
https://www.team-bhp.com/forum/india...les-india.html (Genesis and the journey of sub-4-meter passenger vehicles in India)

[DivyanshuDiv]

The segregation based on lengths has already caused the damage. However, because of these constraints, we have a custom or unique portfolio of cars in India. And these sub-4 meter cars, not only provide more for less, but are apt of urban jungles and aspirational middle-class buyers. My selection will never be based on length in meters but in performance, reliability and value-need factor that a particular car delivers.

[Hayek]

The sub 4 meter rule was a function of lobbying by a certain leading automaker, which wanted to retain its leadership position in India in the face of new foreign entrants and sought to obtain a tax advantage to do so. The only other country which has a similar rule is Japan, with its regulation on Kei cars.

Everywhere else, people have realised that differential taxation rates based on size of the vehicle is meaningless. People argue about parking space, but most parking slots are of a standard size and width, and a 3995 mm long car which is 1795 mm wide occupies the slot as much as a 4710 mm car which is 1850 mm wide (comparing a Brezza and a Allspace). Even on roads, we are more often constrained for width, not length.

What other countries have is differential taxation based on emission levels or fuel economy. Once again, forcing people to make small engines does not necessarily make sense - in the ICE world, a Camry Hybrid probably gives a better fuel efficiency than the 1.2 l petrols in many cars. And there should be a value for lower particulate emissions as well given the pollution levels in our city.

So I think it is time the government abandons this stupid sub 4 m rule which forces people into less safe India specific cars instead of larger and safer cars. But yes, GST concessions for zero emission vehicles and penalising vehicles with high carbon and particulate emissions through higher taxation makes sense.

[asit.kulkarni93]

I think this one rule alone took our market back by 20 years. We could have gotten global products but today most mass market cars are tailored for india(Read- compromised for India). The brands who are unwilling
to make such compromises are left with no business. They either sell outdated cars or leave our market. We are a huge population and a growing market but not that big a car market that we needed exclusive rules like these. Today our ancillary industry would have been working at higher standards and at a much larger scale. These rules have only been beneficial to specific players.

[IshaanIan]

I believe India is a prime market for introducing Japanese Kei car rules in; sub 3.4M cars with small 660cc engines limited to 64hp. This will drastically improve the quality of products available over that bracket and truly free up space on the roads since at the end of the day a learner in a sub-4m car impedes as much traffic flow as a more experienced guy in a Range Rover. I am not sure why our regulators haven’t fancied implementing the Kei Car restrictions here.

[avira_tk]

I got my car at a lower price because of this, the diesel engine is used in 7 seater SUVs/MUVs and it's one of the few cases where a small car gets a big engine. I'm taking about the Sonet D AT,also this allowed a whole generation to enjoy low cost motoring with good performance and economy the swift diesel being the king of the hill then, something petrols will never deliver.

This is being destroyed with anti diesel propaganda and ethanol blending, any car you get today will face exhaust/engine issues because of the drive to ensure lower CO2. This exemption should be maintained for diesel as it ensures lower CO2, petrols need to be excluded, turbo petrol even more so.

[libranof1987]

How has the sub-4m rule really helped the automotive industry, or the consumers in any way?! The argument that this rule allowed better affordability through lower taxes, actually also means that cars that aren't eligible for it have way higher taxes! If the vehicles that qualified under this rule had 0 taxes, sure, tout the rule all around.

What is so scientific about this rule anyway? Why 4m? Why 1.2 or 1.5 for engine capacity? All these parameters are so arbitrary!

Given the buying demographic for the sub 10 lakh category, they'd buy 800cc and 3m if they had even lower taxes = prices. We are a very price sensitive market so people would buy the cheaper option, regardless of the engine capacity or length. The companies that manage to have their way with on Govt. policy could lobby for whatever suits them. We know what's been happening with other important things: be it a/c cabins for commercial vehicles, or airbags being compulsory on cars.

Worse, none of other infrastructure is built around / to support such laws. So, it makes 0 difference on the road.

Let's be honest: these randomly put together laws, far from doing anyone any favours, have actually deprived the Indian buying public of cars of comparable quality and capability w.r.t. developed markets.

[anjan_c2007]

The times are changing. We cannot forever stick to sub 4 m and 4 m plus and the 1.2 and 1.5 L or plus these rules to decide GST rates.

A whole set of algorithms need to be fed to a software designed for the purpose to arrive at the GST rate for a psrticular car/model. Like car dimensions, weight, quantum of obnoxious emissions, fuel consumed per 100 kms, number of NCAP rated safety stars obtained need to all be computed to arrive at the GST slab where the car would slot in. Three GST slabs can be hence designated for car makes and models.

The car taxation norms are constantly undergoing changes in the developed countries. The Japanese Kei car regulations since 1949 (post WW II) when it was first introduced has constantly evolved as of now, to also include vehicle weight and fuel consumption. Their insurance premiums also adhere to the Kei regulations. The U.K. goverment levies Vehicle Excise Duty (VED) on a large spectrum of motor vehicles that take note of key algorithms as will be evident in the pdf file attached below.

Only with such a constant time and need based updation of vehicle taxation rules can we ensure progress of our automobile industry to keep pace with global competition, rather than allowing some particular car maker /s dictate the both the government and the market to suit their personal commercial needs.

[ATTACH=v149-rates-of-vehicle-tax-for-cars-motorcycles-light-goods-vehicles-and-private-light-goods-vehicles]2581548[/ATTACH]

[Comrade]

Just take a look at pricing of XUV300 vs Nexon at one-end and XUV400 ev vs Nexon.ev at other end. Mahindra had to resort to odd chop job with XUV300 purely because of taxation. Else they might have directly offered a XUV400 petrol at Nexon prices.

For me 4 meter length and 1.2L capacity is just random. How will a 4100mm car with 1248cc petrol engine be any different in space, performance, comfort etc etc to a 3998 mm car with 1999cc petrol engine! If you want to give tax benefit to consumers, give it based on ARAI fuel efficiency, emissions and safety. It will solve some purpose.

[PGA]

I find nothing wrong in the sub 4m rule. Some observations I have are:- A large number of car buyers, majority in my opinion, see car from purely utilitarian perspective. How else do you explain Wagon R among the best sellers for so many years now. Upto 90 percent of cars are used only for city runs, regular highway users are extremely small. We have a nascent automobile culture from the driving point of view and from the engineering side as well. We have dire need for space on roads and for parking. Our road transport infra is more for just getting us from point A to B, it is not an example of safety or speed.

In the above context a sub 4m car with a small engine makes so much sense to me, tech today can adjust all the necessary features in a sub 4m as well. And since 70% of the cars sold in our country are sub 4m, I grant it to the collective wisdom of buyers as well.

[saikishor]

Sales numbers will have an answer to this question of yours I guess. Though small cars and sub 4m vehicles contribute to a large amount, the profits that a marque obtains is from the 4m+ segment vehicles. Just look at Hyundai's, Honda's or even Mahindra's sales numbers and you will know what I am saying. Not only that, purchasing power has increased exponentially. EMI's have spoilt people for choice, so much so that a 20-30k difference in monthly EMI gives customers a chance to upgrade from lets say a sub 4m to a 4m+ vehicle. This EMI difference is negligible for most of the public. Now coming back to the question, though I have voted for yes, the answer should be no to most of the public.

Edit: profit margins seem to be different for different manufacturers but my opinion remains the same.