'Where’s The Affordability?' Asks Maruti Suzuki Chairman RC Bhargava

The chairman of India’s largest carmaker, Maruti Suzuki India Ltd., blamed low affordability and high taxes for slowing growth of the passenger vehicle industry.

The average growth of the industry has fallen to 3% over the last decade from 12% growth in the first decade of the 21st century, RC Bhargava said at an event.

“You can’t grow an automobile industry at a 50% tax rate,” he said. “It is the wisdom of policymakers and political leadership. They don’t want the car market to grow fast; may be they want it to grow at 4-5%.”

The company is the only major automaker that remains a key seller of small hatchbacks, a segment witnessing weaker sales as prices rose substantially after the transition to stricter Bharat Stage VI emission norms and higher commodity costs due to Covid-19 and the Ukraine-Russia war.

Over the years, the importance of the mini segment—including models such as the Alto and the S-Presso—in Maruti Suzuki’s overall portfolio has shrunk. The segment's contribution to the company's overall domestic sales decreased to 15% in FY22 from 21% in FY19 and nearly 26% in FY18.

Bhargava said due to the low affordability and sluggish growth of the automobile industry, India will take at least 140 years to catch up with China’s current penetration of car ownership.

The veteran also acknowledged that high tax rates on cars in India can only be reduced when the government is able to find alternative sources of revenue to make up for the potential reduction in revenue from the auto industry.

He welcomed the entry of foreign carmakers into India with the help of free trade agreements, as it will increase much-needed competition in the domestic market and enhance India’s access to big markets abroad.

“It is time that we prioritise increasing our exports instead of being protective of the domestic market,” he said.

Maruti Suzuki also plans to showcase two new SUVs at the Auto Expo 2023 next month. The company’s limited presence in the SUV segment was one of the key reasons for the loss in market share.

Maruti Suzuki said in a statement that it will display an array of 16 vehicles at the Expo, including an Electric Concept SUV, two all-new SUVs, a WagonR Flex Fuel prototype. It will also showcase its customised range of existing products like the Grand Vitara, the XL6, the Ciaz, the Ertiga, the Brezza, the Baleno, and the Swift, among others.