How India became a 3-car country for 30 years

Maruti 800 was to India what Model T was to America in the early 1900s and the Fiat 500 was to Europe in the post-War years. It was at the right place at the right time and the right price.

Before the 800 arrived, for years India had only three cars to choose from: Hindustan Ambassador, Premier Padmini, and Standard Herald. Was it love? What explains the Indian people’s surprising constancy to those cars?

Government policy.

Those cars were not the best fit for India, not in the 1980s, nor in the 1950s. Fans vouch for the sturdiness of their frames and the forgiving nature of their engines, but any other car from the 1950s would have done just as well.

Point is, why did India start with three mid-size cars instead of something smaller like the 500 or the Mini that would have been cheaper and got Indian car manufacturing to shift into high gear 30 years early?

Case for ‘Baby’ Cars

The government was not blind to the need for smaller and cheaper cars. Many members of Parliament had pointed out that the existing cars, priced around Rs 10,000 in 1957, were too expensive for the middle class and new models in the Rs 5,000–6,000 range were needed.

This is what then industries minister Manubhai Shah had to say about ‘baby’ cars, on November 20, 1957: “That can be a real average middle-class family car, particularly for urban use…Undoubtedly the lighter cars are wanted in the interest of the consumer public, particularly the middle-class families in the urban areas.”

Policy Block

But the smaller people-movers did not materialise until Suzuki set up shop in India 30 years later. For a brief period, Hindustan Motors sold a smaller car called Baby Hindustan — “already licensed as far as the manufacturing programme is concerned, but we have not encouraged its large-scale manufacture.”

Why didn’t the government encourage smaller cars? The answer lies in independent India’s well-intentioned but counterproductive early manufacturing policies.

Back in 1953, an advisory body called Tariff Commission recommended that “the manufacture of automobiles should be restricted to a few firms.” The motive was to transform India into a manufacturing country. If only a few car models were allowed, each one of them would sell in larger numbers, bringing economies of scale to encourage local manufacturing.

In fact, before Independence in 1947 and for the first few years afterwards, about three dozen models of cars and altogether 4–5 dozen models of automobiles were sold in India.

The government responded to the 1953 recommendations by allowing only six firms to manufacture selected types of vehicles, including cars, trucks and jeeps. How were these six firms picked? The government called for manufacturing programmes from industrialists, and from those who applied, it approved six.

Before full manufacturing could begin, government imposed restrictions on the assemblers to import only three types of cars and trucks.

Three years later, in 1956, the Commission came back with even stronger advice:

  • “We should give priority to the manufacture of commercial vehicles rather than passenger cars”
  • “It would be definitely undesirable to introduce any more passenger cars for manufacture in the country”

The Economic Weekly of March 2, 1957 criticised this approach because no thought was given to the type of car India needed most: “The Tariff Commission has had to accept the situation as it was and give its approval to the manufacture of cars for which sponsors were already available. A selection on the basis of first come, first served, without looking into the capacity of these cars to suit Indian conditions.”

Dogmatic Attitude

The government went along with the Commission’s advice.

“The government has decided that as far as passenger cars are concerned, the manufacturing units should concentrate on Hindustan Landmaster (now Hindustan Ambassador), Fiat 1100 and Standard Vanguard. Also Standard 10, which is of a lighter variety than the above three models, is being manufactured in sizeable numbers. Until and unless these models go into production in sufficient numbers and also with the requisite percentage of indigenous components to a satisfactory limit, it is the policy of the government not to permit any further models in the passenger cars,” Manubhai Shah said while moving the Indian Tariff (Amendment) Bill, 1957.

Mark the word ‘satisfactory’. Whose satisfaction?

“…in the opinion of the government to produce to the entire satisfaction of the government,” said Shah.

He dismissed the question of promoting compact cars: “We have not encouraged its (Baby Hindustan’s) large-scale manufacture and we would not encourage its large-scale manufacture unless and until the Hindustan Ambassador comes out in a satisfactory way in all respects.”

The government clung to that policy. “We would rather concentrate on the existing models.” Years passed, governments changed but for three decades, India continued to focus on those three initial cars.

***

Chocolate Cake

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