Road tax hikes making cars unaffordable, says Maruti Suzuki chairman R.C. Bhargava

Off lane: It is illogical to relate overproduction with slowdown, says the Maruti Suzuki chairman.   | Photo Credit: Kamal Narang

Citing increases in road taxes by various States as one of the main reasons for higher car prices, making them unaffordable, Maruti Suzuki chairman R.C. Bhargava said that cars cannot be treated as luxury products capable of bearing any amount of taxation.

“I think the most important thing is that why is there a slowdown. Why have customers stopped buying cars as they were buying before. One part of it is was the financial thing and to some extent, because of the intervention by the Centre, that is beginning to change... the attitude of the banks has certainly become much more favourable... But the price problem still remains. And it is to a large extent because in the last few months nine States added substantially to road tax,” Mr. Bhargava said.

As many as nine States, including Bihar, Punjab, J&K and Kerala, have hiked road taxes, leading to an increase of about ₹5,000 to ₹57,000 in the on-road prices of cars.

“The State governments have to realise that this industry is unable to bear this kind of heavy taxation, which they don’t because, in many cases, the officers concerned seem to think that car is a luxury product capable of bearing any amount of taxation. It isn’t, which we have seen now,” he said. Mr. Bhargava said that bureaucrats and politicians needed to understand that products cannot bear unlimited increases in taxation. If manufacturing is to grow in India, the price of manufactured goods has to be within the purchasing capability of the buyers.

“Now you want the car industry to grow. We are selling 3-3.5 million cars, we want to go to 5-10 million, how to do that if the price is increased and goes beyond the reach of people? You will never have that number of buyers. That is something which people need to understand... that you cannot get growth of manufacturing industry, especially in a poor country like India, if the price of the manufactured product is not kept within the reach,” he said.

He added, “One has to look at how to make customers want to buy that product. It’s not in my hands if somebody else is making a major addition to the cost.”

On arguments that over production by auto makers had resulted in the slowdown in the sector, Mr. Bhargava termed it ‘absurd’. “It is not logical to relate the two. How does overproduction lead to a fall in demand from customers? You have seen every manufacturer declaring non-production days to cut down on production. It doesn’t do me any good to have cars and inventory. It doesn’t do the dealer any good to have cars and inventory. So, if anyone thinks that we produce cars for the fun of producing cars, they have some different ideas of how business runs.”

On how long he expected the slowdown to stretch, he said, “I don’t know. But if I was to make what would at best be a guess, I would say that we should start seeing a change in coming months and the next year should be a much better one.”

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Printable version | Oct 25, 2020 10:09:50 PM |

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