September 19, 2021

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Factor in consumer affordability in policies for auto sector: R C Bhargava

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“We have always forgotten customers in the centralised system. If we want to improve the penetration of vehicles to from 25 per 1,000 to even 200 per 1,000 it requires millions of cars to be made every year and an equal number of buyers. Are we sure that at the current rate of employment and income we will be able to match the desired level,” Bhargava said at the 61st annual convention of the Society of Indian Automobile Manufacturers (SIAM).

New Delhi: High rate of tax on automobiles delays the auto sector revival and brings in affordability as a problem for the first time car buyers. In the process of making regulations, the policy makers often fail to consider the economic condition of the prospective customers,
Maruti Suzuki India Chairman R C Bhargava said on Wednesday.

“We have always forgotten customers in the centralised system. If we want to improve the penetration of vehicles to from 25 per 1,000 to even 200 per 1,000 it requires millions of cars to be made every year and an equal number of buyers. Are we sure that at the current rate of employment and income we will be able to match the desired level,” Bhargava said at the 61st annual convention of the Society of Indian Automobile Manufacturers (SIAM).

GST and one-time road tax by states have curtailed the growth of the domestic market, he added.

“The rates of GST are more than double in India, compared to the EU, Japan or the US, and given the lower income levels in India, the question of affordability comes in. GST is not the only thing. States have this one-time road tax, which adds another 8%-9% and takes up the overall tax rate to 37%-38% on cars. Do we need the kind of high taxes we have? In terms of concrete steps which could reverse the declining trend I haven’t seen any action on the ground,” Bhargava reiterated.

Post BS-VI, the price of small cars went up by INR 22,000 which ultimately weighed on the pockets of many buyers, he noted.

“Having adopted all the European standards of safety and emission which we have in the last two years, the cost of vehicles has gone up substantially. Given the lower income level in India the question of affordability comes in when you expect people to buy cars which in terms of all the features are similar to European counterparts except that our tax levels are much higher,” Bhargava added.

According to Bhargava, the level of income growth in the commercial sectors has also come down because of which the customers are finding it difficult to buy a car. He underlined that people buy a two-wheeler not because it is a vehicle of their choice, but because they cannot afford a car.

About clean mobility, Bhargava said that he entirely supports the idea of electric vehicles. But along with that the cost involved affordability comes into the picture.

Summing up his views, Bhargava requested the government to keep the affordability factor in consideration while implementing any policies for the auto sector.

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​During the virtual meet, the Chairman talked of Maruti’s electric vehicle ambitions, reiterating that t​​he country’s largest carmaker will enter only when it is sure its electric product can be affordable for its consumers and also be able to operate with losses

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This comment comes when homegrown vehicle makers Tata Motors and Mahindra & Mahindra have lined up over a dozen pure battery electric vehicles for the Indian market until 2025. In response to queries from several shareholders, Bhargava said Maruti Suzuki is looking at the electric vehicle (EV) segment without making a loss on operations.

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