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Car, components cos differ on CCI order

business Updated: Sep 14, 2014 23:55 IST
Sumant Banerji
CCI

The recent Competition Commission of India (CCI) order to impose a Rs 2,545 crore penalty on 14 major carmakers in India has divided the domestic automobile industry down the middle with the Society of Indian Automobile Manufacturers (SIAM) criticising the order barely a week after the Automotive Component Manufacturers Association (ACMA) welcomed it.

SIAM president Vikram Kirloskar on Thursday hit out at CCI for the order and said that it completely ignores safety of consumers. Ironically, his statements came at sidelines of the annual session of ACMA that had lauded the verdict last Thursday.

“The safety of consumers has been completely ignored by the CCI … the aftermarket for spare parts is just not structured. There is a wide chasm between strict quality standards of original equipment manufacturers (OEM) and the independent free for all garages,” Kirloskar said. “It also demonstrates that government departments are working in isolation and on narrow mandates.”

Vinnie Mehta, director general of ACMA, meanwhile said that it was critical that there is an open market for auto-components as it would be in the best interest of the consumers.

“Similar regulatory frameworks have also been established in Europe and certain states in the USA,” said Mehta.

“Further, the aftermarket in India is plagued with counterfeit and spurious components and allowing larger number of organised players in the market will not only improve the product offering but will also enrich the customer experience of vehicle ownership, thus positively impacting the overall image of the automotive industry,” Mehta added.

The anti-monopoly watchdog had found 14 car manufacturers including market leader Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Toyota and Honda, guilty of violating trade norms by restricting sale of authorised spare parts in the open market. While the Delhi High Court has already put a stay on fine imposed on Maruti Suzuki by CCI, Tata Motors and M&M have said they would challenge the order. CCI also believes that manufacturers price spare parts arbitrarily with very high mark up from an average 100% to as high as 5,000%.

According ICRA, the size of the component industry in India is around two-thirds that of the OEMs while in developed countries, where restrictions are minimal, it is almost as big or in some cases bigger.