Car Market in India Hit by High Court Rulings

India’s new-car market is being hurt by Supreme Court rulings that have tightened regulations on vehicle emissions and owner’s insurance, according to The Nikkei.

One of the court’s rulings, which took effect in September, requires new-car buyers to pay for three years of insurance, up from the one year of coverage previously. The edict resulted in a 6% drop in monthly demand for passenger cars, according to the Society of Indian Automobile Manufacturers.

Maruti Suzuki India Ltd., which accounts for half of new-car sales in the country, says the ruling has raised the price of an average new vehicle by nearly 9,000 rupees ($124). The company’s sales surged 24% to 480,000 units in the fiscal first quarter ended March 31. But demand fell 2% to 480,000 units in July-September. Operating profits for the most recent quarter shrank 10% to 27.1 billion ($372 million).effect on sales and profits in early 2020.

The Nikkei says a second Supreme Court decision will have a similar damping effect on sales and profits in early 2020.

The ruling bans the sale of cars in 2020 that don’t meet new emission standards due that year. Meeting the regulations will require new engine designs and more sophisticated emission control equipment, which are certain to raise vehicle prices.

Shifting to the new emission rules also means that domestic carmakers must sell down inventories of current-standard cars before the end of 2019 to avoid being stuck with vehicles they are no longer allowed to sell. Doing so is expected to generate a surge in year-end demand—and a sales slump in early 2020.

That is exactly what is happening in Europe, where a new emission certification system took effect on Sept. 1. Sales in August surged 30%. But deliveries plummeted 23% in the following month.