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

Suzuki Motor Corp gave a guidance of 20% decline in sales for its Indian subsidiary Maruti Suzuki to its investors in Japan on Wednesday, which is in sharp contrast to +4% growth forecast by the company at the beginning of the year. RC Bhargava, chairman of Maruti Suzuki, in an interview with ET said the market environment is tough and the uncertainty is likely to continue for the coming 4-5 months due to BS-VI transition. Bhargava expressed disappointment at not meeting the target of growth and two million sales target for FY20 and said it is impossible to predict when the market will return to growth track, and what is the right growth for the Indian market, given the way car prices are increasing regularly. He said there is a serious need for the automotive industry and the government to sit together to define a roadmap and relook at significant increase in the cost of ownership. Edited excerpts…

October saw a pickup in demand, but is it sustainable?

It is very difficult to say. The next four to five months will be very difficult due to the transition from BS IV to BS VI (emission norms). In October, barring Maruti, other vehicle makers hardly posted any growth in dispatches as they are in the midst of inventory management ahead of the implementation of the BS-VI emission norms. While the retail was good for most companies during the festivities, in the wholesale space, companies could not do much due to stock adjustment. The next four to five months are going to be uncertain. The industry will face a lot of issues. As for Maruti, we have posted a decline of 25% in the first six months of this financial year, so I don’t expect a major change, and the forecast of Suzuki on India’s growth to be -20% seems fairly close.

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So when do you expect the fundamental growth for motorisation coming back? Are you surprised by mid-single digit growth as against double digit growth expectation?

When you talk of recovery, what is the level of growth you are looking at? Is it a 6% compounded annual growth rate that we have witnessed in the past decade or 10% compounded growth rate seen between 2000 and 2010. If it is 6% growth in this decade, I Im not surprised, compared with the growth of incomes, the cost of cars has been going up faster due to new regulations. There is the usual assumption that people who can own a car can afford to pay more. The cost of owning a car is becoming more expensive, there have been multiple instances of increase in road tax, registration tax, petrol surcharge, insurance, parking — the list is long. Whether one likes it or not, there is an economic factor of price elasticity; when cost continues to rise, acquisition goes down. Then the car is placed in the same bracket as cigarette and alcohol where states continue to increase levies. The way a car is consumed by today’s youth is also having an impact: youngsters today use their money differently, they spend money to go out, eat out, travel and they aren’t left with much to acquire a car.

So, as a market leader how do you plan the coming 5-10 years? Your 2 million target for 2020 is likely to be missed by a distance and you have a vision of touching 5 million by 2030 — how can that be achieved?

Let’s wait until next year. It is not possible to make a prediction because we have to see how the increased cost of ownership is absorbed by the market. I don’t expect much pick-up this year. There’s no point in us making plans of 15% growth when the actual growth rate is different and then we adjust accordingly. My plan has to fit in with the national objective. We should be clear, the automotive industry is a big part of manufacturing, it is such a large sector, there has to be a defined long term roadmap. It accounts for half of the manufacturing GDP and the government understands the importance of the sector. It is as much in the government’s interest as much as ours. The government does not want the car industry to go bust. It is critical that the auto industry and the government to sit down and form a roadmap on what needs to be done. Maruti Suzuki, though a leader, is still part of the overall market, and if the overall market falls, Maruti Suzuki too will.

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