Words don’t help sales, need action from govt, says R.C. Bhargava

They also questioned whether the government recognises the contribution of the automotive industry to the economy, while highlighting how vehicles have become unaffordable for many consumers due to factors, including high taxation and new norms related to emission and safety.

The two were speaking at e session during the annual convention of Society of Indian Automobiles Manufacturers (SIAM), which was also attended by Revenue Secretary Tarun Bajaj.

Mr. Bhargava, who is the Chairman of country’s largest car maker Maruti Suzuki, said a lot of statements were made about the importance of the automobile industry, but in terms of concrete actions which would reverse the declining trend, he has not seen any action on the ground.

“I’m afraid words don’t get us very much in the terms or extra sales, but you need concrete action to make this happen,” he said, adding that this makes him wonder whether old belief that passenger cars are luxury products to be owned only by the rich has really changed in this country.

Mr. Bhargava said he does not believe that the car industry will revive either with ICE or CNGs or biofuels or EV, unless there is an answer to the question of affordability. “We have always forgotten customers in the centralized planning system because the customer didn’t matter… and we still don’t think of the customers when we plan. Will the customers be able to afford those cars?,” he stressed.

Mr. Srinivasan, who is the CMD at TVS Motor Company, added that he would “echo many of the sentiments that have been expressed by Mr. Bhargava.” He further questioned, “…is the automotive industry being recognized for what it has contributed to employment, to revenues, to earning foreign exchange…”

He pointed that in two-wheelers, for mopeds the prices have gone up by 45-50%. The “basic mode of transportation” is being taxed equivalent to luxury level products. In addition, cost has gone up due to factors such as ABS, clubbing of three years of insurance etc.

“I do understand the problems of the government because they have a budget to balance and the basic GST structure is not revenue neutral. So, I don’t know a solution but I think we have given away too many low tax structures for other products which has made one of the major engines of the growth globally to stall,” Mr Srinivasan said.

Replying to the woes of the industry, Mr Bajaj assured that the government definitely recognizes the industry’s contributions. “I think you should not have any doubt that we don’t recognize. I think it occupies a very important position and I can’t agree more with you that if we want to achieve a five trillion economy this sector has to do well.”

He, however, added that he doesn’t anticipate the rates to go down at this stage. “I don’t see any such thing, but I’ll be very happy to engage with you to see what we can do even on tax rate, what is the tinkering that we can do to see to it that certain segments get the encouragement that they deserve,” he said.

The revenue secretary asked SIAM to do a deeper analysis of various factors and their impact on the sector and come back to him with details. “I really want to understand that if this point which is being made so hard by Mr. Bhargava and echoed by Mr. Srinivasan, that the price elasticity of cars is high.”

He questioned that if the price elasticity is high then why sales of SUV are going up by a higher percentage. “…all these are contradictions in economic terms…we really need to go a little deeper to understand what is happening to the auto sector, what is it that the industry has to do, what is it that the government has to do or is it the overall economy, the COVID and the other things, that have disturbed the functioning and that is what we have seen,” Mr. Bajaj said.

“I am ready from the Ministry of finance to engage with my other colleagues also if I can understand as to what are the exact interventions that are required…I am open to engaging with other departments who can engage with States if something needs to be done there,” he assured the industry.

He, however, also added that the focus of any policy can not be only on the fact that we want the auto industry sales to go up, not even knowing whether a change would actually increase the sales of the auto industry.

“…it is not a simple intervention of reducing the taxes that will benefit. We really have to see the 360 degree of what policies we should bring in to ensure that we can support this industry. I can say with all humility and all the responsibility that I command, that we are interested in this industry to go up. I look at this figure every month to see how the economy is doing. So, if there is a feeling that the government is actually ignoring this part, it is not true,” Mr. Bajaj said.