Describe the significance of, and developments in, the automotive industry in the market.
The Indian automobile market is currently the fourth largest in the world, with the scale of production increasing 9.5 per cent year on year. It is one of the most dynamic sectors of the Indian economy with most of the global automotive giants already present in the market and contributing to its growth.
Over the years, India has established itself as a strong base for automobile manufacturing and is now the seventh largest manufacturer of commercial vehicles. Maruti Udyog, which started as an Indian government initiative, was the only major player for a decade until the floodgates for foreign investment into India were opened in 1991. Over the years, both primary and secondary automobile markets in India have developed to witness most reputable international automotive manufacturing companies compete for market share. Although customers have a wide array of automobile brands available in India, Maruti Suzuki India, which is owned by Japan-based Suzuki Motor Corporation, continues to be the leader with 50 per cent of the market share in the passenger vehicle segment. The high demand in the Indian automotive market has also fuelled the growth companies such as the Tata Motors, which accounted for 44 per cent of the sales in the commercial vehicle segment in FY2018.
In terms of foreign direct investment, the Indian automotive sector received close to US$19.2 billion between April 2000 and June 2018. The government of India has driven, and continues to drive growth in this sector with the implementation of a fully liberalised foreign direct investment policy and a host of incentives ranging from tax incentives to incentives for producing electric vehicles.
India’s growing middle class, young population and increasing standard of living have led to two-wheelers and passenger vehicles dominating domestic demand. The two-wheeler segment accounts for 81 per cent of the market share of this sector while the passenger vehicle segment accounts for 13 per cent of the market share. The demand for premium and luxury vehicles and motorbikes in India has witnessed tremendous growth with companies such as BMW registering a sales growth of 11 per cent growth in sales year-on-year.
India is also a prominent automobile exporter with overall automotive exports growing at 15.54 per cent between April 2018 and February 2019. According to a statistical report of the Society of Indian Automobile Manufacturers (SIAM), the exports of passenger vehicles have constituted the maximum share of the segment over the past few years.Regulation
What is the regulatory framework for manufacture and distribution of automobiles and automobile parts, such as homologation process as well as vehicle registration and insurance requirements?
The Motor Vehicles Act 1988 (MVA) read with the Central Motor Vehicles Rules 1989 (the CMV Rules) issued thereunder by the central government constitutes the principal regulatory framework for manufacture, registration and insurance of automobiles and automobile parts. The MVA vests authority with the central and state governments to make and implement rules regulating the construction, equipment and maintenance of automobiles with respect to several aspects including dimensions, emission norms, automobile parts such as brakes, steering gears, safety devices and warranty after sales. The central government primarily administers and regulates the industry through its apex wing, the Ministry of Road Transport and Highways.
The manufacturing and maintenance of an automobile must comply with the parameters and standards as prescribed under the CMV Rules and those notified by the central government from time to time. The checks and controls are formulated at the stages of (i) proposal to manufacture or import a new automobile; (ii) during the manufacturing process; and (iii) sale and use of an automobile.
A manufacturer or importer that proposes to manufacture or import a new automobile is required to obtain approval of the prototype of such automobile from the designated testing agencies. The procedure for type approval and certification of automobiles for compliance with the MVA and CMV Rules should accord with the Automobile Industry Standards as prescribed and notified by the central government. While the production of automobiles is ongoing, the CMV Rules require a conformity of production test to be conducted periodically on automobiles drawn from the production line to verify that they conform to the approval certification. Upon manufacturing being completed and sale of an automobile, the manufacturer has to issue a certificate of roadworthiness and quality to the owner and thereafter, for in-use vehicles, owners are required to obtain a pollution under control (PUC) certificate a year after the date of its registration.
As in most other jurisdictions, every vehicle is required to be registered by the owner with the concerned registering authority and cannot be driven on public roads prior to registration. The vehicle is to be registered with the registering authority in a jurisdiction where either the individual resides or his or her place of business exists. An automobile’s registration certificate is valid for a period of 15 years for petrol automobiles and 10 years for diesel automobiles from the date of issue of the registration certificate, and the same can be renewed thereafter for five years subject to inspection and the roadworthiness of the automobile.
Insurance of an automobile is compulsory before the automobile can be driven in a public place. Insurance of an automobile is provided by an authorised insurer, which issues a certificate to the policyholder. An insurance policy is usually valid for a period of one year and is required to be renewed before the due date. The MVA mandatorily requires the insurance policy to cover third-party risks.
An important development in the regulatory regime of the sector will be enforcement of certain crucial and much-awaited amendment to the MVA, which are proposed in the Motor Vehicles (Amendment) Bill 2017 (Amendment Bill). The Amendment Bill is presently pending in the Indian Parliament. The Bill seeks to introduce a host of amendments to the MVA. One of the most important of these is the mandatory recall mechanism, which includes prescribing grounds for recall, notification requirements and penalties. The Amendment Bill also seeks to impose a penalty on manufacturers of motor vehicles that fail to comply with the provisions of the MVA and CMV Rules with imprisonment for a term that may extend to one year or with fine that may extend to 1 billion rupees or with both.Development, manufacture and supply
How do automotive companies operating in your country generally structure their development, manufacture and supply issues? What are the usual contractual arrangements?
Although there has been no limit on foreign direct investment in the automotive industry, most foreign automotive companies have been doing manufacturing and distribution business in India by setting up joint ventures with Indian counterparts. Automotive parts manufacturers have also followed this commercial setup.
In a typical joint venture arrangement in the automotive sector, the Indian party is responsible for obtaining all local licences and approvals required for manufacturing operations. On the other hand, the foreign investor, besides bringing in capital contribution, is primarily the source of technology, technical assistance and R&D. Support, technology and technical assistance is usually licensed by the foreign partner to the joint venture subject to certain standard conditions (such as limited use by the joint venture for the purposes of manufacturing limited products). The foreign partner often negotiates a royalty (usually based on the total sales made by the joint venture company) as a consideration for licensing the technology to the joint venture.
Most of the leading auto parts and component manufacturers and suppliers, including Delphi, Visteon, Mando, Sumitomo Wiring Systems and ZF Steering, have followed the multinational automotive companies in setting up their plants and shops in India. These suppliers have entered into supply arrangements with the automotive manufacturing companies.
The automotive manufacturing companies distribute and sell their products to retail customers through an authorised dealership network. The automotive manufacturers enter into contractual arrangements with the dealers for distribution to retail customers. Certain standard conditions for eligibility and continuity of dealership include adequate infrastructure, personnel, investments and working capital. The dealership agreements usually prohibit the dealer from engaging in distribution of automobiles manufactured by competing brands.Distribution
How are vehicles usually distributed? Are there any special rules for importers, distributors, dealers (including dealer networks) or other distribution partners? How do automotive companies normally resolve restructuring or termination issues with their distribution partners?
Vehicles are as a general commercial practice distributed on the basis of contractual arrangements between manufacturers and authorised dealers as mentioned above.
There are no specific legislations regulating the business of distribution or dealership of automobiles. All commercial terms including provisions relating to termination and restructuring are agreed between the manufacturer and the distributors or dealers under private contracts. Usually, contracts do allow parties to terminate the contract with a reasonable notice period. On a related note, given that automobile distribution agreements have come under the scrutiny of the Competition Commission of India for alleged malpractices, such as resale price maintenance, exclusive distribution agreements and tie-in agreements, caution must be exercised to ensure that such distribution agreements are not anti-competitive in any manner.
Recently, we have witnessed the automotive manufacturing companies operating in India to have become conscious about the management structure of family owned and run dealerships. In fact, some of the automotive manufacturers are contemplating to amend the dealership contracts to ensure that the dealer entities are organised or reorganised with consolidated management control vested in the family leader, rather than shareholding being spread and fragmented across numerous family members.
The conditions and specifications in relation to the import of first- and second-hand automobiles into India are specified in the Foreign Trade Policy (FTP) and regulated by the Director General of Foreign Trade. The FTP prescribes certain requirements with regard to the import of automobiles such as:
- new automobiles can be imported into India through notified Indian customs ports, while second-hand automobiles can be imported only through the Indian customs port in Mumbai;
- only certain identified categories of second-hand automobiles can be imported into India;
- imported automobiles are required to conform to the MVA and CMV Rules; and
- the importer is required to submit a certificate from a notified testing agency at the time of importation certifying that the automobile is in conformity with the MVA and CMV Rules.
Are there any particularities for M&A or JV transactions that companies should consider when preparing, negotiating or entering into a deal in the automotive industry?
There are no particularities for M&A or JV transactions for the automotive industry as such. But generally due to the size of the automotive industry, due diligence is considered desirable in relation to real estate, waste management processes, environmental approvals and compliance with employement-related laws.Incentives and barriers to entry
Are there any incentives for investment in the automotive market? Are there barriers to entry into the market? What impact may new entrants into the market have on incumbents?
The government of India has played a major role in promoting investment in the Indian automobile sector. The central government primarily extends support and incentives to the automotive industry by way of tax exemptions and reductions such as customs duty charged on imports of automotive components when imported in completely knocked down kits (meaning units that contain a pre-assembled engine or gearbox or transmission mechanism or a chassis where such parts or sub-assemblies are installed). The central government has also endeavoured to extend tax-related reductions to exporters of auto components under the Merchandise Exports from India Scheme, notified in the latest FTP of 2015-2020.
In the recent, past the government of India has launched a number of schemes to encourage the growth of the automotive sector such as:
- the Automotive Mission Plan 2016, which aims to increase the domestic production of automobiles, increase automotive exports and address environmental and safety challenges;
- the National Automotive Testing and R&D Infrastructure Project, which has been set up to enable the industry to adopt and implement global performance standards by establishing nationwide automobile testing agencies;
- the National Electric Mobility Mission Plan 2020, which provides incentives to manufacturers of electric cars; and
- the Faster Adoption and Manufacturing of (Hybrid and Electric Vehicles in India) scheme, which provides monetary incentives to producers and purchasers of eco-friendly vehicles in the country. The government of India approved the second phase of the scheme in February 2019.
In addition to the central government incentives, some of the state governments have been actively involved in developing incentives to be offered to the automotive sector, especially to attract foreign automobile manufacturers to set up in India. The incentive offers usually involve lease and sale of land at concessional rates, reductions in land-related levies or duties and power tariffs, concessional rates of interest on loans and investment subsidies. Very often, the state governments also offer special incentive packages for mega projects.
The Indian automotive industry does not pose any specific entry barriers that are not present in other countries. Being a capital-intensive sector, production has proven to be cost-effective only if large volumes are achieved. The new entrants thus often have to face financial challenges until economies of scale have been achieved. In an extremely competitive market such as India, building up a brand is challenging and time-consuming, specifically in this sector, owing to customer loyalty with the established manufacturers (such as Maruti in India). New entrants often face high costs and hurdles and find it difficult to compete with the well-established brands. The other general commercial issues are the huge costs involved in technological advancements and modifications to the product to suit the Indian customer base.
The Indian market has been experiencing the entry of growing numbers of foreign automotive manufacturers including in the luxury and the sports car segments, with companies such as Maserati, Aston Martin and Lamborghini setting up dealerships and aftersales infrastructure in India. Large or small, it is a fact that even the well-established automobile manufacturers have to make more investments to retain their customer base in view of increasing competition.
Product safety and liabilitySafety and environmental
What are the most relevant automotive-related product compliance safety and environmental regulations, and how are they enforced? Are there specific rules for product recalls?
The MVA read with the CMV Rules authorises the central government to notify, from time to time, Quality, Safety and Performance Standards, the standards in relation to any part, component or assembly to be used in the manufacture of an automobile. Every manufacturer is required to obtain the prototype of the part, component or assembly for which standards have been notified and approved by any agency referred to in rule 126 of the CMV Rules. After obtaining approval, every manufacturer shall also certify compliance with the statutory form prescribed under the CMV Rules.
The Ministry of Environment and Forests has laid down rules to ensure that standards for emissions of air pollutants from automobiles are kept in consonance with the international standards. Schedule IV of the Environment (Protection) Rules 1986 provides for standards for emissions of smoke, vapour, etc, from automobiles. The Bharat Stage Emission Standards (based on European regulations) are emission standards that have been set up by the central government to regulate air pollutants from internal combustion engine equipment, including motor vehicles. Currently the vehicle emissions standards adapted throughout the country are the Bharat Stage IV or BS-IV. The MVA requires every automobile owner to carry a valid PUC certificate, which is issued by the designated checking facilities to certify compliance with the prescribed emission norms. The current emission standards applicable in India are due to be updated very shortly, with the Ministry of Road Transportation and Highways, amending the CMV Rules to mandatorily require every vehicle manufactured on or after 1 April 2019 to be compliant with the new Bharat Stage VI (BS-VI) emission standard. While this shift to a new emission standard is a much-needed step in the right direction, it is bound to present a host of challenges to many existing automotive manufactures in the county going forward. Many auto manufactures have already begun redesigning the engines of existing vehicle variants to ensure that they will be BS-VI compliant.
The MVA prescribes punishment by way of a fine in the event a person is found to be driving an automobile in any public place that violates the standards prescribed in relation to road safety and pollution.
There is no statutory regulation or law in India governing the recall of vehicles. To date, all recalls in the Indian automotive sector have been made by automotive manufacturers on a voluntary basis. In 2012, the SIAM, a voluntary association of automotive manufacturers, launched the Voluntary Code on Vehicle Recall 2012 (Voluntary Recall Code). Since then, recalls of vehicles have been undertaken by automotive companies in India in accordance with the Voluntary Recall Code.
The statutory framework for recalls in the automotive sector has been proposed in the Motor Vehicle Amendment Bill 2017, an amendment to the MVA (the existing principal automotive legislation). The amendment seeks to empower the central government to direct manufacturers to recall their vehicles if they suffer from a defect that may cause harm to the environment, drivers or occupants or other road users; and in case of the defect being reported to the central government by owners, testing agencies or any other source. If it becomes law, the amendment could be one of the biggest developments in the Indian automotive sector.Product liability and recall
Describe the significance of product liability law, and any key issues specifically relevant to the automotive industry. How relevant are class actions or other consumer litigation in product liability, product recall cases, or other contexts relating to the automotive industry?
At present, there is no legislation that deals with product liability specifically in the case of automobiles. In the event a customer suffers losses as a result of a defect in an automobile, such customer has a remedy against the manufacturer or supplier of the automobile (as the case may be) under the Consumer Protection Act 1986 (the CP Act), which is specific legislation for protection of the rights of all consumers. Claims under the CP Act can be made before various forums at the district, state and national level (consumer forums). The term ‘defect’ has been widely defined in the CP Act to include any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods.
A customer or purchaser of an automobile has a remedy against the manufacturer or the supplier of an automobile (as the case may be) under the CP Act as mentioned above. The usual and bare minimum remedy granted by the consumer forums is a refund of the price of the automobile along with interest or replacement of the automobile in cases of a manufacturing defects. Further, the consumer forums often grant damages for harassment and mental harm caused to the consumer if the consumer proves that the accident and the injury and losses were as a result of the manufacturing defect.
It is within the power of the consumer forums to award damages in a case involving death or very serious permanent injury, but there is no typical range of such damages and they generally vary on a case-to-case basis. There is no limit on the damages that can be awarded and the consumer forum will take into consideration factors such as loss of income, nature of the family members dependent upon the injured or the deceased person, mental pain and harm suffered, etc.
The Civil Procedure Code 1908 provides for class actions or group actions whereby one person may, with the permission of the court, sue or defend on behalf of all persons having the same interest. The CP Act also provides for consumers as a group or class to institute a complaint against a manufacturer or supplier. However, this has not been very popular, as opposed to class action, which lies before the High Court of each state or the Supreme Court of India (the apex court) in the form of a public interest litigation (PIL) for the enforcement of public interest.
A PIL may be moved not only by an aggrieved party but also by a public-spirited individual or a social action group for the enforcement of the fundamental rights or legal rights of an aggrieved party who is unable to approach the court for reasons such as being in a disadvantaged position on account of poverty, disability or other social or economic impediment. PILs form part of the writ jurisdiction of the High Courts and Supreme Court of India and accordingly can only be filed against an aegis of the state or any other party exercising public functions. Over the past decade, there has been an increasing number of PILs filed in the court concerning several issues. For example, pursuant to a very well-known PIL filed by an environmentalist before the Supreme Court of India, the higher or stringent emission standards for automobiles were introduced by the Delhi state government. The stand taken by the auto manufacturers was that they were meeting the standards laid down under Indian laws and after the court order, the emission standards were tightened to reduce vehicular pollution.
What competition and antitrust issues are specific to, or particularly relevant for, the automotive industry? Is follow-on litigation significant in competition cases?
The Competition Commission of India (CCI) (the authority regulating competition in India) actively investigates allegations of anti-competitive behaviour in the automotive sector. The investigations carried out by the CCI are either initiated suo motu by the CCI, based on press reports and information flowing from parallel cases, or on the basis of information provided to it by third-party informants. The most notable competition-related issue in the automobile sector was Shamsher Kataria v Honda Siel Cars India Ltd & Ors, Case No. 03 of 2011 (CCI, 25 October 2014), in which the CCI investigated various automobile manufacturers for anticompetitive practices - it is understood they denied market access to branded spare parts and diagnostic tools and thereby hampered the ability of independent repairers to provide aftermarket repair and maintenance services to automobile owners.
Such practices have allowed automobile manufacturing companies not only to have monopolistic control over the spare parts and diagnostic tools market under their respective brands but also to charge arbitrary and steep prices for said products, in violation of the provisions of the Competition Act 2002 (the Competition Act).
The CCI observed that owing to technical specifications of the cars manufactured by each original equipment manufacturer (OEM), the spare parts of one brand cannot be used for the repair and maintenance of cars manufactured by another OEM. Since the spare parts of one OEM are not interchangeable or substitutable with that those of other OEMs, each OEM is shielded from competition in the aftermarket from existing competitors in the primary market.
Further, the agreements entered into by OEMs with their original equipment suppliers (OESs) and authorised dealers prohibit the sale of spare parts to independent repairers in the secondary market. The CCI was of the view that each OEM holds a position of strength, which enables it to affect its competitors in the secondary market or aftermarket, thereby limiting consumer choice and compelling consumers to behave in a manner beneficial to the OEMs, which allows them to enjoy a dominant position and strength in the aftermarket for spare parts.
In addition to levying a heavy penalty, the CCI directed OEMs not to place any restrictions on the operation of independent repairers and to allow OESs to sell spare parts freely in the open market. However, OEMs have been permitted to charge royalties or fees where they hold intellectual property rights on parts provided that the same is not in violation of the Competition Act. The order of the CCI was appealed by some of the automotive manufacturers before the Competition Law Appellate Tribunal (COMPACT), established under the Competition Act. COMPACT, while hearing the appeal, concurred with the findings of the CCI and upheld the penalty that was levied. This order of the COMPACT was stayed by the Supreme Court of India in November 2018.
While some of the automotive manufacturers chose to appeal to the COMPACT, others chose to file a writ petition in the High Court of Delhi, inter alia, challenging the constitutional validity of the decision-making process, adopted by the CCI while adjudicating matters. This writ petition was successful and the High Court of Delhi in April 2019 struck down the decision-making process as presently provided for in the Competition Act, as unconstitutional. In its order, the court allowed the appellant automotive manufactures to prefer an appeal against the order of the CCI to the National Company Law Appellate Tribunal (NCLAT) (which is now the appellate authority against an order of the CCI) within six weeks of 10 April 2019 and directed the NCLAT to entertain the appeals on their merits, unhindered by any period of limitation.
Usually, investigation by the CCI is initiated on the basis of claims brought by private parties or government authorities, which are either directly or indirectly aggrieved by the industry or party in question. There has not been much change in the nature of informants over the years, which can be said to be mixture of a private individuals, trade associations, chambers of commerce, direct competitors in the market, enterprises engaged in distributing activity for a dominant manufacturer, and others.
To date there have not been many reported cases relating to the automobile sector that have been adjudicated by the CCI and thus it would be difficult to comment on the trend of follow-on litigation. The case of Shamsher Kataria is one of the first cases where the complainant filed a complaint against more than one automobile manufacturer and pursuant to the investigation undertaken by the CCI, many others were impleaded as respondents.Dispute resolution mechanisms
What kind of disputes have been experienced in the automotive industry, and how are they usually resolved? Are there any quick solutions along the supply chain available?
In the past few years, the disputes relating to the automotive industry that have made headlines primarily involve the hurdles faced in acquisition of large pieces of land for setting up manufacturing plants and employee-related issues.
Until early 2014, land acquisition was regulated solely by the Land Acquisition Act 1894, which was an archaic law. Although the Act permitted land acquisition by automotive companies it became a platform for numerous farmers to challenge the adequacy of compensation given out by the automobile manufacturers and non-adherence of due process at the time of acquisition. This resulted in stalling of the projects until the matter had been decided by the courts or the companies reached an out-of-court settlement with the owners of the land. The most talked about of such cases involved Tata Motors. In 2006, Tata Motors announced plans to set up an automotive factory in Singur, West Bengal for its small car project. Shortly after, it faced protests by farmers against the state government’s proposal to acquire 997 acres of farmland. The unrest continued until 2008, when Tata Motors was forced to relocate its factory to the state of Gujarat. However, the government has made continued efforts to bring about legislation that makes acquisition of land easier for the manufacturing industry. In 2014, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 was enacted with the aim of making the process more fair and transparent. The government further plans to propose new laws that would provide more benefits to the industries acquiring land.
Given the scale of the automotive industry, which involves the setting up of large industrial plants, often the trade unions and worker associations are very strong and have the ability to influence the workers. Lately, one of the concerns for several automotive manufacturers has been unrest among workers who have been working as contract labourers continuously for a long period of time but have not been absorbed by the automotive companies as permanent employees. It was often found that these contract workers were devoid of the statutory benefits and protections that would be available to a permanent employee. There are judicial precedents where the courts have come down heavily on industries for adopting such a practice.
Further, over the years, automotive companies have experienced disputes with consumers in relation to quality control issues faced by them during aftersales services or malfunction of the car on the roads.
As a quick solution, automobile manufacturers have the option to seek interim injunctions from the courts, which are granted on a case-by-case basis after taking into account several factors and circumstances. In relation to labour issues, Maruti and other automobile companies have been seen to engage in negotiations and settlement with workers. This has been a quick solution for some but not for companies such as Maruti, which, according to the available news reports, has spent a long time negotiating with its workers.Distressed suppliers
What is the process for dealing with distressed suppliers in the automotive industry?
There is no prescribed procedure or process for dealing with distressed suppliers of automobile components or spare parts. However, to avoid any slowdown or breakdown in the manufacturing process, it is usually in the best interest of the automobile manufacturers to provide financial support to extricate suppliers from their crunch.
It has been seen that since the automobile manufacturers provide proprietary information to automobile part suppliers and vendors, as a commercial decision the manufacturers are reluctant to let go of their suppliers and often extend financial help to the suppliers that enables them to revive and continue with business.Intellectual property disputes
Are intellectual property disputes significant in the automotive industry? If so, how effectively is industrial intellectual property protected? Are intellectual property disputes easily resolved?
The automobile industry is one of the most innovative industries and thus, intellectual property (IP) is a vital asset of automotive companies. Over the years, the industry has witnessed significant IP disputes ranging from disputes on patents to industrial designs and copyrights.
The aesthetic look of an automobile is the ultimate commercial feature of any automobile company. Automobile leaders such as Mercedes, GM, Honda, Toyota, Tata, Bajaj and many more have already established their own brands with unique design impressions. These industrial designs are extended protection under the Design Act 2000 upon registration with the relevant authority.
The Trade Marks Act 1999 provides, inter alia, for registration of a trademark, filing of multiclass applications, increasing the term of registration of a trademark to 10 years as well as recognition of the concept of well-known marks, etc. Hence, protection of trademarks and marks in the automotive industry where an automobile is known by its marks and symbols becomes important. The Indian courts provide a plethora of precedents wherein infringement or violation of the Trade Marks Act has been analysed and law has developed over the years through these precedents.
The Patent Act 1970 also plays an important role in the automobile industry. Any new invention in terms of technology and technique can be granted protection when registered with the concerned authority. The software developed by automotive industries for further enhancement of the functions of the automobiles is also protected by way of copyrights under the Copyrights Act 1957.
As is apparent from the current scenario pertaining to the IP laws in India and their application in the automotive industry it can be said that registering any particular IP goes a long way and is extremely helpful when it comes to protecting oneself against IP theft.
The ease or difficulty with which an IP dispute can be resolved varies from case to case depending upon various factors such as the defence of the opposing party, available evidence, the ability of the adjudicating authority or officer, etc. Generally, disputes involving issues relating to trademarks are resolved relatively faster as opposed to those involving patents. This is primarily because trademark issues are less complex than those relating to patents.
There could also be delays because of misadministration of such matters, but this has not gone unnoticed and the state High Courts have been questioned by the Supreme Court of India over such delays. For example, in December 2007, Bajaj Auto Limited filed a suit before the Madras High Court for an injunction against TVS Motor Company Limited for the infringement of Bajaj’s patent. The relief in terms of an interim injunction in favour of Bajaj restraining use of the abovementioned patent by TVS was awarded in February 2009. Upon an appeal being preferred by TVS before the superior division bench of the Madras High Court, the earlier order of the single judge was revoked. Upon further appeal being preferred by Bajaj before the Supreme Court, the Supreme Court expressed its discontent at the pendency of the IP matter before the state High Court since December 2007 at the interlocutory stage and directed the state High Court to commence the hearing of the suit on a day-by-day basis.
Employment issuesTrade unions and work councils
Are there specific employment issues that automotive companies should be aware of, such as with trade unions and works councils?
A unionised workforce is common in an organised industry such as automobile manufacturing. Automotive companies with manufacturing operations in India have on many occasions witnessed labour unrest caused by a plethora of reasons, ranging from a demand for an increase in wages to a demand to reinstate terminated employees. One of the most talked about is the fiasco that occurred at the manufacturing plant of Maruti Suzuki in 2012. The growing unrest among the workers was mostly owing to miscommunication between the management and the employees, demand for wage hikes and permanent employment, reinstatement of dismissed workers and demand for recognition of labour unions, among other reasons. As mentioned above, several automobile companies came under the radar for adopting the practice of hiring contract labourers to do almost every job in a factory and keeping them devoid of permanent employment, which would require provision of minimum statutory benefits to the workers. There seems to be growing consciousness among workers about this practice and hence, a large proportion of workers have been disgruntled with respect to the salary and benefits offered.
In March 2013, a tool-down strike took place at Mahindra & Mahindra’s automotive plant at Nashik in Maharashtra because of differences over wage negotiations and suspension of a few workers. Similarly, in July 2016, workers at Honda Motorcycles and Scooter India held large-scale protests with the objective of trying to reinstate employees who were leaders of the labour union. In October 2018, a large number of employees working at the manufacturing plants of several motorcycle manufactures located in Chennai, including Eicher Motors and Japanese Yamaha Corporation, staged a walkout demanding higher wages and permanent employment for those employees currently working as contract employees. More recently, in March 2019, employees from Asahi India Glass Limited, a joint venture between Asahi Glass Co Limited Japan and Maruti Suzuki India Limited, went on strike against the unlawful dismissal and suspension of employees, and also demanded a wage increase.
Over the years, one of the major reasons for employment disputes has been identified as a lack of a proper communication channel leading to poor management of the employer-employee relationship. This can be attributed to the fact that management like to deal with a representative appointed by the employees, but the representative is usually driven by agendas of only a section of the employees. This results in an atmosphere of mistrust in the management in the minds of the employees.
There have been numerous cases brought before the courts involving unrest among workers owing to suspension or termination of employment of a worker that has been challenged as being unfair or arbitrary by the trade union or the employee.
New technologiesLegal developments
What are the most important legal developments relating to automotive technological and mobility advances?
The government of India has attempted to introduce legislation to regulate advancements in automotive and mobility technology. However, most has not yet become law and is still in the nascent stages of development.
Such legislation includes the Geospatial Information Regulation Bill 2016, which proposes to regulate the acquisition, dissemination, publication and distribution of geospatial information. This includes geospatial imagery or data acquired through space or aerial platforms such as satellites, aircraft balloons or graphical or digital data depicting natural or man-made physical features, phenomena or boundaries of the earth. The bill proposes the creation of a Security Vetting Authority, which will be authorised to carry out security vetting of the geospatial information of India. The government of India has also launched a number of schemes to encourage the growth of the automotive sector, such as:
- the Automotive Mission Plan 2016, which aims to increase domestic production of automobiles, increase automotive exports and address environmental and safety challenges;
- the National Automotive Testing and R&D Infrastructure Project, which has been set up to enable the industry to adopt and implement global performance standards by establishing nationwide automobile testing agencies;
- the National Electric Mobility Mission Plan 2020, which provides incentives to manufacturers of and purchasers of electric cars; and
- the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme, which provides monetary incentives to producers and purchasers of eco-friendly vehicles in the country. The government of India approved the second phase of the scheme in February 2019.
Additionally, private cab aggregators such as Ola and Uber have revolutionised public transport in India by introducing the concept of pool rides, which are aimed at providing cheaper rides to customers while being eco-friendly at the same time. The central government, by way of the Amendment Bill, is also proposing to insert provisions in the MVA, which will give it more of a say in laying down the conditions under which cab aggregators are granted licences in the future.
Update and trendsRecent developments
Are there any emerging trends or hot topics in automotive regulation in your jurisdiction?No updates at this time.