Maruti Suzuki Chairman RC Bhargava calls for lower-tax small cars to help two-wheeler users shift to safer passenger vehicles.There is a need to introduce small cars entailing a lower tax slab to offer an alternative to consumers at the lower end of the pyramid to shift from “risky” two-wheelers to passenger vehicles, Maruti Suzuki India Chairman RC Bhargava said on Thursday.
Speaking at Maruti Suzuki’s 44th Annual General Meeting here, he noted that with changes in emission and safety regulations over time, the cost of entry-level cars has increased, making them unaffordable for many prospective buyers.
“Considering that a large percentage of the population is dependent on two-wheelers for personal transportation, the high risk and discomfort associated with these vehicles, there is a need to consider the introduction of cars that would provide an alternative to the scooter owners,” Bhargava said.
He noted that Japan in the 1950s solved a similar problem by introducing the Kei cars. They are smaller, have lower safety regulations and are subject to lower taxes than other cars, he added.
Elaborating on the causes for the increase in small car prices, Bhargava said that in 2018-19, it was decided that European Safety and Emission Standards should be introduced in India.
“And that has been the reason why the downtrend in small cars and overall slowing down of the car industry happened,” he noted.
Many of the people at the lower end of the pyramid, who were buying and using two-wheelers, were unable to buy the higher-cost, safer cars, he added.
“We believe that we need to balance this situation in a manner that the users of two-wheelers can move to safer cars because two-wheelers are the most risky in terms of safety,” Bhargava said.
He noted that the revival of the small car segment can lead to an overall faster growth of the car industry.
“We will see more industrial activity and we will see a larger generation of employment opportunities. I think all of this is needed in the coming times when the talent problems are creating a different situation in other parts of the economy. We have to do our part to help meet the total Indian situation,” Bhargava said.
He noted that the Indian car industry developed after the country’s independence, but under severe constraints.
The car industry in India under the socialist system was regarded as non-essential and taxed along with other so-called sin products, he said.
Yet China, which is a communist country, has become the largest producer of cars in the world, he added.
China treated vehicle ownership as an enabler of urban mobility and economic growth and offered infrastructure incentives, R&D grants and consumer subsidies besides other facilities to grow the industry.
As a result, between 2000 and 2017, car production in China increased from 2 million units a year to 29 million units, Bhargava said. In Japan, during 1955 to 1970, similar rapid economic growth was accompanied by high growth of car production, he added.
“I hope we will find a similar situation happening in India,” he stated. Replying to a query, Bhargava noted that Maruti’s market share has been stable at around 41-42 per cent over the last couple of years.
The company expects that the revival of the small car segment is expected to boost its market share. The small car segment, which had once dominated the Indian total passenger vehicles market, accounts for less than 30 per cent at present.
Entry cars priced below ₹5 lakh, which used to be around a million units (9,34,538 units) in FY16, have declined to just 25,402 units in FY25.
