The Automotive Research Association of India (ARAI) is intensifying its efforts to expedite the audit initiated by the Ministry of Heavy Industries following more than 10,000 complaints regarding Ola Electric’s inadequate service standards being reported to the Central Consumer Protection Authority.
To ensure affected customers receive a fair resolution, the ARAI has instructed Ola Electric to submit documentation related to customer interactions and service data from all Ola Electric service centers.
This move will allow for a thorough examination of the rising complaints concerning service delivery challenges encountered by its customers.
Additionally, the ARAI is in the process of forming a dedicated internal team to investigate the various issues reported by customers, senior officials of the testing agency told Autocar Professional.
When asked about the possibility of recalling scooters to ensure affected customers receive justice through the replacement of faulty units, Reji Mathai, Director of ARAI, said that leading Indian OEMs must take greater responsibility for the products they manufacture. “We have already requested Ola Electric to provide consumer and service data. Addressing the CCPA is of paramount importance. We will collaborate with MHI to determine the necessary actions,” Mathai further said.
Sources within the ARAI have informed Autocar Professional that the organization intends to broaden the scope of its Conformance of Production Audit (COP).
Traditionally, these COP audits involve random selection of vehicles from either the original equipment manufacturer (OEM) facility or the dealership.
The ARAI plans to enhance this audit by correlating it with customer complaints to pinpoint components that exhibit the highest failure rates and assess the measures taken by the OEM to address these issues.
Rohit Chaturvedi, partner of Transport and Logistics and Government Infrastructure at Forviz Mazar, a US-based audit, accounting, and consulting firm, spoke of the necessity of this approach. He said that OEMs should establish clear escalation protocols to perform regular audits of their suppliers, monitor parts to detect defective vehicles and create solid contracts with suppliers and partners.
Chaturvedi also stressed the importance of OEMs clearly defining warranties, indemnities, and the distribution of responsibilities, which the ARAI aims to scrutinize.
Chaturvedi further noted that in contrast to a promoter-driven company, a well-managed corporate board can effectively regulate management behavior by instituting appropriate control mechanisms, an area where Ola could see significant improvement.
Insights from government experts
Randheer Singh, former director of electric mobility at NITI Aayog and founder of Foresee Advisors said, “The results from ARAI’s investigation will determine if a recall is necessary or if the issues can be addressed through service and quality enhancements.”
Singh does not anticipate the government making exceptions to enforce a mandatory recall unless ARAI’s findings reveal a widespread safety concern.
“The framework for voluntary recalls is established to motivate manufacturers to assume accountability, and should ARAI uncover significant evidence of a widespread problem, it may prompt Ola to take appropriate actions in accordance seem to be one of prudence—ensuring that due process is adhered to while avoiding any hasty disruptions to the market.” Singh said.
He said, “At this moment, the investigation conducted by ARAI is expected to shed light on whether a recall is warranted or if remedial actions at the service and quality levels can effectively resolve the issues at hand.”
ARAI intends to ground its investigation in line with violations of the Central Motor Vehicle Rules (CMVR).
According to sources within ARAI, the concerns surrounding Ola are more closely related to CMVR violations that fall outside the typical scope of a testing agency’s responsibilities. They have more to do with the Motor Vehicle Act 1998 which is administered by the Ministry of Road transport and Highways.
ARAI is the testing agency of the Ministry of Heavy Industries which traditionally conducts a range of audits and assessments of vehicles, components, and systems.
Their audits typically include vehicle certification and homologation for various automotive vehicles, systems, and components, as well as component-level certification and testing of wheels, tires, and glass for the Bureau of Indian Standards (BIS).
The testing agency is fulfilling the government mandate to undertake the audit in the case.
What do legal professionals have to say?
The government also has the authority to impose fines or mandate that car manufacturers replace affected vehicles.
In a research paper that focuses on the legal implications for automotive companies, Pradeep Ratnam, a senior partner, and Aaroh Bhargava, an associate at the Delhi-based law firm Kochhar & Co note that India’s automobile industry has recently experienced a surge in incentives aimed at attracting investment.
Legal experts say In the case of Ola Electric, the violation is recognized under the Motor Vehicles Act, and a new Consumer Protection Act has been enacted, empowering the central government to mandate recalls.
“The Motor Vehicles Act (MVA) empowers authorized officials to access a manufacturer’s facilities to examine records and operational procedures. Non-compliance with manufacturing guidelines, technical standards, and safety regulations may lead to vehicle recalls and financial penalties,” Pradeep and Aroha note in their evaluation of how the law is being enforced.
The MVA makes directors and officers accountable for the actions of the company. “Officers in default” encompass non-executive directors who endorse a violating act through board consent. While the MVA aims to bolster manufacturing safety, the Consumer Protection Act of 2019 addresses product liability from the viewpoint of consumers,” the team at Kochhar Law Firm explained.
Currently, from a regulatory standpoint, the responsibility of proof has effectively shifted from the consumer to the manufacturer and seller, who must disprove the assumption of liability for specific defaults, according to other legal professionals.
Perspectives from Global Experts
Harshvardhan Sharma, who leads Nomura’s Automotive Retail Consulting Practice characterized the ARAI’s initiatives as constructive advancement. If ongoing issues are identified, government involvement could expedite solutions, thereby improving consumer protection and ensuring industry accountability, he told Autocar Professional.
Sharma also expressed concerns about the necessity for government action in cases of recurring safety problems. He stressed that consumer safety must be prioritized, pointing out that while voluntary recall policies allow OEMs the latitude to rectify defects, “serious safety issues, especially in the rapidly growing EV sector, require firm actions.”
According to Nomura’s specialist, both the U.S. NHTSA and Japan’s Ministry of Land, Infrastructure, and Transportation require recalls when public safety is at risk, indicating that similar regulations could be adopted in India.
“If multiple incidents suggest persistent issues, government involvement could facilitate quicker resolutions, thereby ensuring consumer safety. It will also hold the industry accountable. This is particularly relevant when evaluating the ethical obligations of Original Equipment Manufacturers (OEMs) in the context of customer dissatisfaction,” Harshwardhan remarked.
OEMs carry a significant ethical responsibility to prioritize safety and promptly address safety-related grievances. “From an ethical perspective, transparency is crucial—OEMs ought to maintain open lines of communication with consumers, as exemplified by global leaders like Toyota through their proactive recall strategies,” he noted.
“A prompt reaction, which may include voluntary recalls or corrective actions, not only protects consumers but also cultivates enduring brand loyalty,” Sharma emphasized.
These organizations have established standards by voluntarily recalling products in response to safety issues, often preempting regulatory action, thereby highlighting the necessity of thorough safety evaluations and effective risk management.
Insights from Auto Industry Experts
Venugopal Rao Nellutla, the former Chief Marketing Officer of Keto Motors, asserts that the government should mandate manufacturers like Ola Electric to rectify component issues and initiate recalls to enhance customer trust, especially since these manufacturers benefit from subsidies that support their financial stability and business growth.
“Especially when the government is providing subsidies, OEMs must be accountable for fulfilling their commitments to end users who place their trust in the brand and its products,” he added.
Amitabh Saran, Founder & CEO of electric three-wheeler manufacturer Altigreen Propulsion Labs said, “The company itself must thoroughly investigate the use case.”
Recalls occur when there is a failure in the manufacturing process by the original equipment manufacturer (OEM) or when a specific batch from a supplier does not meet quality assurance standards, Saran explained.
India & Recalls
The Society of Indian Automobile Manufacturers (SIAM) has implemented a voluntary recall code that has significantly influenced the recall process in India.
In July 2012, over 5.67 million vehicles were recalled, comprising 3,931,185 cars and SUVs, as well as 1,743,195 two-wheelers.
In 2022, there were 278,405 vehicle recalls, and from January to April 2024, an additional 317,531 vehicles were recalled.
Ola Electric tryst with recalls
In 2022, the company recalled 1,441 Ola S1 Pro electric scooters following a fire incident in Pune.
The company conducted diagnostic assessments on the scooters, concentrating on the battery, thermal, and safety systems.
In May 2023, Ola Electric announced a refund of Rs 130 crores to customers who had purchased EV chargers along with scooters between FY 2019-20 and March 30, 2023.
Regarding the fork arm issue in the S1 and S1 Pro models in 2023, Ola asserted that a full recall was unnecessary due to the low failure rate.
Ola Electric which has sold around 705,346 units since 2021, noted in 2023 while addressing the front fork, one of the primary sources of customer complaints, “Typically, a recall is mandated when the failure rate exceeds a certain threshold, which in India is set at 2% of all vehicles sold.”