Auto industry is near bottom of downward cycle: Maruti Suzuki Chairman Bhargava

Stating that the company saw a sharper dip in car sales in the nine States that increased road tax, the Chairman said State governments have a larger told to play than the Centre.

Stating that the company saw a sharper dip in car sales in the nine States that increased road tax, the Chairman said State governments have a larger told to play than the Centre.   | Photo Credit: Reuters


‘Company should return to usual growth rate in 2021’

India’s largest car maker Maruti Suzuki is hopeful of bouncing back to its "usual rate of growth" in 2021, though the environment remained challenging amid transition to new regulations during the current financial year.

“My belief is that we are near bottom of the downward cycle and the economy and car sales should start to accelerate in the near future. The fiscal year 2021 should again see your company coming back to its usual rate of growth,” R.C. Bhargava, chairman of the company, told shareholders at its AGM held on Tuesday.

Mr. Bhargava added the company had no plans to retrench any of its 16,050 permanent workforce. However, Maruti Suzuki had not renewed contracts of about 3,000 contractual workers.

In his message to the shareholders, the company’s MD and CEO Kenichi Ayukawa said the time ahead remained “challenging and uncertain” for the automobile industry as many regulations were getting implemented during FY20.

“We will have to see how the customers will react to these changes and shape up the volume growth for the year. With many regulations coming into force, one of the major tasks of the company is to acquaint customers about the importance of new technologies,” Mr. Ayukawa said.

He added the demand environment in the initial few months was not encouraging however, with “a historic mandate given to the NDA government, the political stability in the country has increased significantly. This may prove to be an important factor in reviving the customer sentiment and bringing growth to the automobile sector.”

Watch | India's auto industry crisis explained

Talking about the slowdown, Mr. Bhargava said the bulk of the cars was bought by middle class consumers who did not have “unlimited deep pockets” and over the last couple of months, many factors combined to increase the final cost that the customer had to bear to buy a car.

This including new safety norms leading to car prices going up by about ₹22,000, transition to BS-VI, rise in insurance cost and non-availability of finance.

“More significantly to my mind... during slowdown, nine States increased road tax by substantial amount. There was a much sharper dip in sales in these States. The result is that in these States customers have to pay up to ₹97,000 extra to buy a car,” Mr. Bhargava said, adding it was time that States also become a partner in the endeavour to grow manufacturing in the country.

“The Finance Minister recently announced some measures, but I think it is necessary to understand that the growth of manufacturing, growth of the economy is not entirely the responsibility of the Centre. The State governments, I believe, have a larger role... They have much more to do with the cost of operating industry. The taxation of State governments is quite high, for example taxes on petrol,” he said.

While Mr. Bhargava said the company was committed to transitioning to electric vehicles (EVs), availability of small and affordable EVs for individual customers was “not likely in the next few years. “We have been testing EV. However, advancement in technology is not as fast as we had hoped to achieve...We will move as fast as technology enables us. Suzuki, with the support of Toyota, is working on developing electric vehicles. However, the challenges for electric vehicles in India, arising mainly from battery technology, and infrastructure limitations are likely to result in electric vehicle acceptance by customers being slow in the short-term,” Mr. Bhargava said.

He pitched for CNG vehicles, hybrid cars and the increasing use of biofuels to achieve the objective of reducing oil consumption and pollution.

Mr. Bhargava added that the company did not expect a pile of BS-IV vehicles as a result of shift to BS-VI complaint models. Additionally, with the carmaker deciding to do away with 1.3L diesel engine post BS-VI implementation, Mr. Bhargava said the models – Vitara Brezza and Ertiga, will come with petrol engines.



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Printable version | Dec 15, 2019 10:37:15 AM |

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