Business Today

Recall the last recall?

Globally, car recalls to rectify defects are commonplace. In India, it's still a novelty because of the effete regulatory framework that is supposed to protect consumers.

Kushan Mitra | Print Edition: March 21, 2010

In mid-2009, the news broke that there seemed to be a problem with the floormats in the Toyota Camry in the US (the mats were blamed for pushing the accelerator pedals down). The issue seemed like a small one and the company rubbished claims for a recall. By third week of February, Toyota Motor Corporation had recalled a whopping 8.1 million cars in Europe and America. That was more than Toyota's production of 7.81 million vehicles in 2009. Toyota India's Deputy Managing Director, Sandeep Singh, clarified that there were no issues with the products sold in India since they got their parts from a different supplier, though he would not be drawn into a debate regarding a design flaw.

The problems were not Toyota's alone. Honda recalled over 640,000 cars in January and 400,000 more in February and then on February 24, Maruti-Suzuki announced that it was recalling 105,000 A-Stars (sold as the Alto in Europe) because of a faulty fuel pump that could lead to fuel leakage. These included around 35,000 cars sold in Europe as the Nissan Pixo. The Indian media went to town with the story, though Maruti bosses were unperturbed about this. Chairman R.C. Bhargava asserted that this was a "proactive" recall before any consumer complained.

In the last few months, close to 10 million vehicles have been recalled.
CompanyToyota Motor CompanyHonda Motor CompanyMaruti-SuzukiHyundai
No of vehicles 8.1 million across the world1 million across the world100,000 50,000
ModelsCamry, Prius, Aygo, RAV4Fit/Jazz, second-generation City (including 8,500 in India), Civic, Accord, CR-VAll A-Stars, including 40,000 in IndiaSonata (the new models, not sold in India as yet)
ProblemSticking accelerator pedalsFaulty power window switchesFaulty gas pumpFaulty rear-locks

The above examples have put the spotlight once again on how carmakers, in an attempt to consolidate sales numbers and market position, sometimes over-exceed themselves. Indeed, globally car recalls are not uncommon. The National Highway Traffic Safety Administration (NHTSA) in the US recalls cars for everything from malfunctioning window wiper systems to defective car jacks that collapse when a user raises the car to change a tyre.

But in India certainly it's a novelty, even though experts believe there have been umpteen cases where the manufacturer has been at fault. Veeresh Malik, entrepreneur and consumer rights advocate, believes that recalls don't happen often enough in India and most recalls that have happened are due to "global" faults.

"There is no agency such as NHTSA in the United States that can mandate recalls," says Malik. What's more, in India insurance companies that actually have traffic accident data treat it like an official secret—unlike the West where this data is available to the public and safety authorities and gives early warning signals about defects in particular car models. In fact, Malik says that he wrote to the Insurance Regulatory & Development Authority (IRDA) to make this data available but to no avail.

The problem, according to one industry insider, is with the Indian regulatory framework. Vehicle safety comes under the Ministry of Road Transport & Highways, the insurance data goes to the Ministry of Finance and car buyers' rights come under the Ministry of Consumer Affairs. Worse, with few legal options other than consumer courts, consumers have no legal recourse.

In fact, India has had only one major "classaction" court case that is common in the US—the Bhopal Gas tragedy—which is slowly winding its way through the courts 25 years after the event. In the event, therefore, car companies or for that matter any product company is safe in the knowledge that tort law in India is not codified and any action will take years to wind through the Indian legal system by which time most products would have lived their entire product cycle.

In contrast, in western countries the auto companies can be sued for millions if they find manufacturer's fault—and hence as a preventive measure, the faulty car models are swiftly recalled for repairs. Of course, most companies in India, say analysts, are also loath to recall in an attempt to retain brand equity—given the global experience. Toyota is a case in point.

As more details emerged of how the company saved $100 million (Rs 460 crore) by delaying regulatory safety changes, Toyota Chairman Akio Toyoda made a grovelling apology in front of the lawmakers to avoid damaging the company's reputation in the US market. In India, Maruti has already been inundated with queries and questions from A-Star customers. Dilip Chenoy, Director General, Society of Indian Automobile Manufacturers (SIAM), though, says that the pre-emptive steps by Maruti could help its reputation, "because consumers would have started talking of the A-Star's poor fuel economy otherwise".

Some industry observers feel that cars in India are not as safe as they ought to be. "Not only do manufacturers downgrade the vehicles they sell in India by removing safety features (airbags, anti-lock braking and in some cases even make structural changes), but they also take advantage of Indian consumers' willingness to accept problems," says Malik.

Chenoy, however, takes a contrarian stance, arguing that vehicles in India face strict tests (even though vehicles sold here do not require mandatory crash testing as of now). Recalls have happened in India several times in the past. "They have just not been called a ‘recall'," he says, "the Environment Protection & Control Authority (EPCA) mandated that Tata and Ashok Leyland rewire their CNG buses in 2005. What was that if not a recall?" All said and done, in India the regulatory framework needs an overhaul to make carmakers more accountable. The change can begin with something as simple as insurance data being made available to the public, but that will possibly require the de-tariffing of automotive insurance— another issue, like 3G telephony, that hangs fire even after several years.

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