Stock Analysis, IPO, Mutual Funds, Bonds & More

Both dealer and customer finance costs are going to come down: RC Bhargava, Maruti

FM’s quick responsiveness to industry issues bodes well for the future, says Maruti chairman.

ET Now|
Last Updated: Aug 24, 2019, 12.22 PM IST
RC Bhargava-1200
The most impressive part was the commitment which the finance minister has shown to sorting out the problems in all sectors of the economy, says RC Bhargava, Chairman, Maruti. Excerpts from an interview with ETNOW.

The auto sector has finally got the government’s attention. Is that enough or is this just a step in the right direction but not enough to fix problems in the short term?
No, the most impressive part was the commitment which the finance minister has shown to sorting out problems in all sectors of the economy.

This kind of commitment and attention to detail and getting into micro level improvements which are needed to make it simpler is overall going to help not only the auto sector but also the economy considerably.

What the finance minister has said and done should help in changing the sentiment and making an improvement in the climate but along with that, I will also now hope that the state chief ministers would also have a look at what is happening in the industry and follow the example of the central government and the finance minister to look at rolling back the road taxes.

These are recent taxes and they have come at a time when the industry was in a downturn and if these are rolled back like the registration tax for some months, that will make the biggest impact on the industry.

Can you be specific in terms of the depreciation policy and the fact that there is going to be some relief on the inventory front? How would this address the slowdown and the inventory pile up for auto companies and especially for Maruti?
No, no. It is not the inventory with Maruti which is a cause of the slowdown. We do not have that kind of an inventory and this depreciation policy will work for the commercial vehicles which are bought and where the buyer will get a 30% depreciation during this financial year.

But what is going to make a difference is that the financing cost for customers are going to come down from what the finance minister announced. Both dealer finance and customer finance costs are going to get reduced and that will be a major factor in bringing down the cost of purchase of a vehicle because today the higher cost of purchasing vehicles is a major factor contributing towards the downturn in the industry.

Just last week you were telling us what the Finance ministry needs to do to get the auto sector back in top gear. A lot of those measures and suggestions were announced today for inventories with the registration fee also being waived off. She has also promised cheaper auto loans reviving the banks as well. But is it going to bring consumption back because we have also seen that the middle class doesn’t have the bandwidth to buy cars right now?
No, I am not sure. The cost of cars has gone up so much that the middle class is deferring purchases and bringing down the total cost of buying the car and certainly reduction in the cost of consumer finance is going to help in that. But as I said, the state government also needs to follow the example of the central government and help in bringing down the cost of ownership of a car.

Last time when we interacted with you, you painted not a very rosy picture for the auto sector. After Friday’s announcement, would you say that a little bit of optimism has come back and if yes when do you think the U-turn will be visible?
Do not ask me to be of soothsayer but certainly what has been announced by the finance minister should bring a great deal of cheer to the market, not only the automobile market but all markets and the industry as a whole. The approach which the government is taking bodes very well for the future.

It is the first time I have seen this kind of quick responsiveness to issues raised by the users of the finance ministry’s product. That is a huge advantage. Everybody needs to understand the implications of what is happening. For example, the finance minister’s announcement of a mechanism by which the bank officials will be assured that any genuine risk taking by them in the commercial interest will not be penalised ever. So, a mechanism has been put in place to safeguard them and it is a great improvement and will make a very big difference to the whole financing structure.

Also Read

Economy hit by lack of political consensus, says Maruti boss RC Bhargava

Policy makers need to view if auto sales should drive growth, jobs: RC Bhargava

Cars getting expensive, unaffordable: Maruti chairman RC Bhargava

Incentives needed to turn around motown fortunes: Maruti Suzuki's RC Bhargava

Auto sector revival as much in govt's interest as in ours: Maruti Suzuki chairman RC Bhargava

Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service