CCI’s ruling may help only 20% of car buyershttps://indianexpress.com/article/news-archive/web/ccis-ruling-may-help-only-20-of-car-buyers/

CCI’s ruling may help only 20% of car buyers

Anti-competitive practices by automakers allegedly led to charging of higher prices.

Only around 20% of car buyers may actually get any benefit if the Competition Commission of India (CCI) concurs with the report submitted by its director general (investigation) that reportedly alleges anti-competitive practices by 17 domestic automakers for restricting parts supply in the open market and charging higher prices.

This is because the four top domestic automakers,Maruti Suzuki,Hyundai,Tata Motors and Mahindra & Mahindra,who together account for almost 80% of the passenger vehicle market,already sell genuine spare parts for most models in the market through their own channels.

“The companies which restrict original parts to their dealers account for only about 20% of the market,while most major companies who target the mass segment of small cars already sell parts in the open market to attract customers by keeping ownership costs low. This 20% largely consists of buyers of premium and luxury cars,who are more likely to stick to company dealers even if the same parts are sold outside,” an auto company executive said.

Since parts from the top four companies are readily available,market forces are at play to keep costs low — dealers/companies cannot charge extra because the customer can get the same part replaced outside.

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Deepesh Rathore,MD of IHS Automotive India,said,“Monopoly on parts may be fine in some cases,because many parts are proprietary components. Controlling distribution through the company’s own dealers helps a consumer know the part is genuine as he has no way to find out if a part is spurious when he buys it outside. However,automakers should not be charging a high premium — it is in their own interest to keep ownership costs low and make cars more affordable.”

According to the Automotive Component Manufacturers’ Association,the automotive after-market in India is worth Rs 33,000 crore,out of which components account for Rs 24,800 crore,while auto component counterfeit parts account for a shocking Rs 8,700 crore.

A market survey by FE found that the selling price of some most commonly replaced parts is not very different in the open market and at company dealers. But the higher charge that the consumer pays at the company dealers largely comes from taxes and labour costs. For example,in the open market,the windscreen of the Maruti Swift is for Rs 4,000,a side mirror for Rs 950,a bumper for Rs 2,400 and a tail light for Rs 1,500. The price is almost the same at a company dealer.

However,another industry official said the matter is about giving consumers a choice of buying company-branded parts or from another vendor which may be equally good,but cheaper. The lack of an alternative creates the market for cheaper spurious parts,which pose a safety threat. “There are laws in Europe that guarantee consumers adequate choice. The point is that though some companies sell parts in the open market,they jack up the price when it is branded by them. There may be vendors certified as per global standards who can sell the same part in the open market at a lower rate,but are not allowed to do so today,” said the official.

Meanwhile,Hyundai has obtained a stay order against the CCI probe from the Madras High Court,arguing that the regulator had suo motu expanded the scope of investigations to the entire car industry even though the original complaint had been against just three car makers — Honda,Volkswagen and Fiat.

The CCI is now expected to give its final order after reviewing the director general (investigation) report that has reportedly found the 17 companies guilty of anti-competitive trade practices after reviewing various documents including supplier-company contracts. If the CCI agrees,the move will be seen as consumer-centric and benefit independent workshops,and auto companies may end up paying hefty penalties. In fact,Jagdish Khattar,former Maruti Suzuki managing director who today runs Carnation,a multi-brand car workshop chain,has now also joined the CCI charge against the automakers. For Khattar,availability of parts in the open market will be a welcome boon for the business as currently he cannot source components for many brands.

PART & PARCEL

* Maruti Suzuki,Hyundai,Tata Motors and M&M sell genuine spare parts for most models in the market

* Honda,Volkswagen and Fiat restrict supply of spares to their dealers

* Hyundai has obtained a stay order against CCI probe