This week, Toyota announced it would recall 45,000 Innovas, as part of a global move to recall 64 lakh vehicles, to replace a faulty part.
The move was followed by speculation market leader Maruti was also going to issue a recall for some models of its popular Swift and Dzire variants.
The is the latest in a saga of auto recalls in which Indian carmakers are increasingly warming up to the idea of recalling their vehicles in case of defects being discovered during the manufacture process.
Also read: Toyota says to recall 6.58 mn vehicles
In 2013, Chevrolet decided to recall 1.4 lakh Taveras, Ford recalled 1.6 lakh Figos and Classics (and 973 of its then-just-launched EcoSport) while other carmakers such as Toyota, Nissan, Maruti and Mahindra initiated a recall for Corolla, Micra, A-Star and Scorpio.
Recalling vehicles is a common occurrence in the West where typically automakers often ask owners to bring cars to service stations to have faulty parts replaced for free of cost.
But in India, this was an unheard-of event with carmakers being wary of having their name "tainted" if their vehicles were seen as being manufactured with a defect.
Analysts believe that the sudden onset of a recalls is not an indication of low manufacturing standards but companies getting over the phobia recalls brand value and sales.
To be fair to car manufacturers, there are 5,000 parts that go in an average car and it may be virtually impossible for even a quality-focused company to ensure defect-free manufacturing at all times.
For instance, in an indication that customers do not look at recalls with dread anymore, even as the EcoSport was recalled soon after launch, it went on to achieve robust sales, becoming a top player in the MUV segment.
No auto recall policy yet
But as recalls gather pace, one of the biggest and fastest-growing auto market is yet to have in place a formal auto recall policy.
Industry body Society of Indian Automobile Manufacturers in June 2012 put in a voluntary recall code, in which it did not favour a penalty for automakers -- a penalty was suggested to be levied only in case a company was seen as not taking immediate action upon discovering a defect.
But in developed countries such as US, laws are stricter. Both Toyota and General Motors have been recently slapped with a fine for various transgressions over recalls -- the former faces a mammoth USD 1.2 billion fine over "circumstances relating to" high-profile recalls in 2009 and 2010 where several Toyota vehicles were discovered facing a sudden acceleration problem.
But the only word about whether a US-style recall policy could be seen in India came in the form of a 2012 decision by the Cabinet to set up a "National Automotive Board", a nodal agency for all policy related to the Indian auto sector.
But little progress appears to have been made on the same.
Analysts believe that the sudden onset of a recalls is not an indication of low manufacturing standards but companies getting over the phobia recalls brand value and sales.
To be fair to car manufacturers, there are 5,000 parts that go in an average car and it may be virtually impossible for even a quality-focused company to ensure defect-free manufacturing at all times.
Maruti Suzuki stock price
On April 10, 2014, Maruti Suzuki India closed at Rs 1959.20, up Rs 25.95, or 1.34 percent. The 52-week high of the share was Rs 1979.55 and the 52-week low was Rs 1217.00.
The company's trailing 12-month (TTM) EPS was at Rs 106.68 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 18.37. The latest book value of the company is Rs 615.03 per share. At current value, the price-to-book value of the company is 3.19.
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