“Everyone says diesel has been pushing SUV sales. How does one then account for the relatively slow growth in (diesel) car sales?” asks Pawan Goenka.
The President of Mahindra & Mahindra’s Automotive and Farm Equipment Sectors reiterates that fuel has nothing to do with SUV (sport utility vehicle) sales. “India is finally a diesel SUV market and not a diesel car market,” he says.
This premise is based on the fact that SUVs present a much larger basket of products from a host of companies at various price points. In addition, they comfortably meet the needs of diverse user segments.
As Goenka says, this puts in perspective their phenomenal growth which has nothing to do with diesel being cheap. “Our own XUV 500 has lots of space and allows people to do their own thing, whereas this is not possible with a car. Before the Duster and XUV came in, we did not have this level of comfort or a premium feel in an SUV.”
The Scorpio was the first to open doors to this product category a decade ago but choices were still limited then. Today, the market offers a bigger range at different price points and uses. The list includes the Maruti Ertiga, Renault Duster, M&M’s Quanto, XUV etc and will soon have a significant entrant in the Ford EcoSport.
“We are only 30 years behind the US where this SUV explosion happened in the 1980s. Every garage then had an SUV and the same trend will be replicated in India,” Goenka says.
Tax troubles
However, he cautions that a big speed-breaker to this growth could be imposition of an ‘artificial tax’ on SUVs. “This will be unfortunate and essentially a mistake because SUVs are not significantly less fuel-efficient than sedans. The flexibility they give customers is tremendous.”
In M&M’s view, the auto industry is already heavily taxed with excise duty on larger vehicles now at 27 per cent. Other levies take this figure to over 31 per cent and coupled with state level taxes, it is even more mind-boggling. The industry believes that an additional tax will be catastrophic especially when overall growth is little to write home about.
The Government has set in motion a diesel pricing policy to reduce the differential with petrol gradually. To observers, this reflects its intent of steering clear of any tax on diesel vehicles. Eventually, they add, oil companies will be better off with deregulated diesel as it will help curb their growing fuel losses.