Cars getting expensive, unaffordable: Maruti chairman RC Bhargava
- Bhargava blamed higher taxes on petrol and diesel and upward revision in road and registration charges by state governments for adding to the burden of car buyers
- He stated that a temporary cut in GST (from existing 28% to 18%) won't make much of a difference, and can be avoided
At a time when auto sales have crashed to historic lows, Bhargava also blamed higher taxes on petrol and diesel and upward revision in road and registration charges by state governments for adding to the burden of car buyers. He added that a temporary cut in GST will not make much of a difference, and can be avoided.
Bhargava’s views on GST conflicts with the demand made repeatedly by auto industry body Siam and other CEOs, who have petitioned the government to bring down tax on vehicles from 28% to 18%. “The guy who rides a two-wheeler wants to upgrade to a four-wheeler. But he’s unable to do so in terms of his financial capacity,” the Maruti chairman told TOI in an interview, while pointing out sales of Alto have crashed 50%.
Bhargava refused to buy arguments that the present slowdown in the auto sector — where sales have touched lowest in two decades — is related to “structural shifts” such as the rising popularity of shared mobility such as Ola and Uber. Rather, it is due to a number of factors, such as stricter safety and emission norms, enhanced insurance costs, and additional road tax in around nine states, which have depressed the sentiment.
The cumulative effect of the factors has increased the cost of an entry car by around Rs 55,000, including around Rs 20,000 through higher road tax in certain states, Bhargava said. And, the biggest issue is reluctance of the banking sector where officers are “very shy of taking the slightest risk” in terms of financing.
Bhargava said stipulating additional safety norms, which are prescribed in the developed countries, has no practical logic for a country like India. “The Indian car buyer is not like the European or the Japanese car buyer. The per capita income here is around $2,200, China has around $10,000, and Europe about $40,000. How do you compare with those people? But when it comes to regulations, everybody in India says we must have the best regulations … you have to look at the affordability of a product considering the Indian level of incomes and not somebody else’s level of income.”
As vehicles get expensive, the inability of the two-wheeler rider to upgrade to four wheels also exposes him to greater risks on the road. “… which is riskier? A small car without airbag and ABS, or a scooter. Obviously, the scooter.”
Maruti chairman Bhargava has said India Inc should avoid paying “obscene salaries” to their top management, as steps are required to make the society “much more equitable”. “Just see how much difference there exists today … I have a problem with high salaries and ostentatious consumption,” Bhargava told TOI, adding that the Japanese society is much more equitable.
The Maruti chairman said an MD should be paid a maximum of 15-20 times the salary of an ordinary worker who has given the same number of years in the company.