Environment to the defence

Ironically, Indian scooter manufacturers keep the Chinese at bay using strict emission norms. With WTO rules in place, domestic emission norms are vital in shaping the highly competitive market. Environment is both an opportunity and a threat, find the automakers

 
Last Updated: Sunday 28 June 2015

Environment to the defence

-- THE World Trade Organisation (WTO) regime threatens to shake the Asian market. Today, the market is divided between countries that produce and those that import. But WTO will act as a leveller in the market. Since it disallows trade barriers and ordains uniform laws for domestic manufacturers and the importers, the only way countries can check emissions is with stringent standards. But for countries without emissions standards the future looks bleak: Bangladesh, for example, cannot prevent the influx of inferior products because it does not have any regulations. "Bangladesh is reeling under pollution but does not have emissions standards to guard against polluting imports," says M Iqbal Kabir, advocate at the supreme court of Bangladesh and member of the Bangladesh Environmental Lawyers Association, which is fighting an air pollution case in the court.

Some manufacturers are, however, becoming conscious that environmental regulations can influence access to market. This is evident in the case of Taiwan: its stringent norms protect it from inferior imports. But Taiwanese producers realise this protection is only a short-term one. Shu says, "Taiwan is advancing its research in the small and medium sized scooter." They are now investing in research and development (R&D) to improve technology and raise emission standards. The regional R&D organisations are looking at a variety of advanced technologies. Extending the product lines to higher value added products, such as 250 cc engines, electric fuel injection for two-wheelers and are some of the focal points of the research in Taiwan.

The Chinese threat
Many companies in India perceive a threat from the cheap Chinese imports. Home to more than 200 two-wheeler manufacturers, China produces nearly 12 million two-wheelers every year - almost 54 per cent of the total production in Asia. Enviable economies of scale and state subsidy allow them to under price the product. This can affect Indian industry, which largely caters to the domestic market. Chinese producers will enter either through joint ventures with Indian companies to get the brand advantage or sell components. Companies including Bajaj and Kinetic are already shopping in China for components. And Monto Motors, makers of the Avanti Moped, is reported to have imported couple of hundred Chinese bikes for sales to begin in January.

In India, the only thing that has kept the Chinese 'attack' at abeyance till now is the strict emission standards. The standards might not be good enough to solve the crisis of pollution but they have certainly aided the cause of domestic manufacturers. But this may not be the case in the future. The 100 cc motorbike segment, today dominated by Hero Honda, is expected to be the most vulnerable. Atul Sobti, vice president, Hero Honda, guesstimates that if Chinese succeed in meeting Indian emissions standards and fuel economy requirements and still sells at 30 per cent cheaper rate they could secure nearly 10 per cent of the market share. Under WTO, the Chinese government would have to dismantle the subsidy structure also which may somewhat erode the price advantage but not so much given their economy of scale. Invoking anti-dumping laws could be possible but not easy, feels Sobti. Indian competitors are still putting up a brave front saying that track record is more critical than selling cheap.

Despite being the world leader in emissions standards for two and three wheelers, the industry only grudgingly admits that stringent emissions regulations can help to protect market share of the Indian companies. The Chinese still do not meet the Indian standards - precondition for entry into Indian market. According to market information the current batch of two-wheelers that have arrived in India could pass muster only after fitting catalytic converters.

Rahul Bajaj, chairperson and managing director of Bajaj Auto Ltd, says, "The industry strategy can only be to improve its competitiveness at the product cost, quality and customer service level. The tight emission standards were not set up to deal with import competition. If at all they provide a temporary barrier it is an unintended fallout."

Sobti admits: "For the moment keeping ahead in emission standards can work so far as holding the Chinese at bay is concerned. The Chinese cannot provide products with good track record and consistent quality. But we must not lose sight of the cost effectiveness of incremental environmental benefits."

Quite surely, the incremental benefits cannot be the end all. Public pressure has pushed the automakers and the government to move a step ahead in solving this truly Asian crisis. Srinivasan gives India's example: "The environmental imperative in Delhi has set the agenda for the entire country." And one agrees with Rahul Bajaj when he says that the industry has done much, yet there is a long road ahead. The Asian auto industry has won only small battles. The real war can be fought only if Asia arms itself with information and research on the pollutants that two and three-wheelers emit and wage an informed battle. It is the Asian scientific community and its policymakers, which will have to find solutions that fit the bill. Asian countries can learn from each other's experiences. Bangladesh, for instance, can take a leaf out of the Indian CNG auto casebook and India from Taiwan's progressive strategies. The only way to reach the destination and reach it in time is to leapfrog ahead - think Asian and think ingenous.

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