The Indian government’s push to muscle out the fossil-fuel powered vehicles by 2030 is causing major confusion among car makers. After the government decided to add cess on the select segment of vehicles, many manufacturers including Honda have been hard hit after they were forced to hike the vehicle prices.

Honda Car India has indicated that in a long run, such policies will make the Indian car market very unattractive. The government has applied more cess on the bigger cars, which means smaller vehicles will get more incentives and will get a push in sales. Such policies will make global manufacturers like Honda change focus from India to some other countries. This could delay the investment for technologies involving electric, hybrid, and even fuel-cell vehicles.

Yoichiro Ueno, president and chief executive, Honda Cars India talking to Moneycontrol, said this,

The sub 4-meter tax structure is unique to India. It is isolating the Indian market from other global markets. Too much promotion of small cars creates imbalance and it is always better for the consumer to have a balanced tax structure for small and big cars.

With the implementation of new GST (Goods and Services Tax), prices of all the vehicles including small cars, sedans, and SUVs had dropped by 2-15 percent which caused a lot of rush among buyers to get new vehicles. The government then created a different segment of vehicles and re-introduced a cess on vehicles that have larger than the 1.2-litre petrol engine and 1.5-litre diesel engine and are larger than 4-meter. This created a widespread dissatisfaction among the manufacturers who had to increase Rs. 10,000 to Rs. 1.6 lakh on their vehicles. Buyers may also stay away, or opt for lower/cheaper variants.

Honda, which has been a ‘large car’ maker says that the shift to focus on small cars is not easy. Honda Chief in India also says that the government’s push is making the Japanese automaker shift focus from India to other countries. Ueno adds that if the government keeps the focus strong on sub 4-meter vehicles, where Honda is not very strong, the focus will shift to some other country from India.