Over-regulation is killing the auto sector: Rajiv Bajaj

Over-regulation is killing the automobile industry, according to Rajiv Bajaj, Managing Director, Bajaj Auto. “The single most important reason or the most inimical factor out there responsible for the state of affairs is over-regulation,” he said, referring to the plummeting sales the sector has been grappling with.

Responding to a query, at a press conference, on what the upcoming Budget can do to alleviate the automobile industry’s woes, Bajaj said, “I don’t think there is anything in particular that the Budget can do that will immediately solve the problems faced by the industry in terms of slowdown or lack of growth. Because the Budget was never the problem in the first place. It is about one-and-a half years that sales or business have headed down and there are multiple reasons for that. But the single most important reason or the most inimical factor is over-regulation. It is over-regulation that is killing the industry.”

Bajaj explained that the woes started in September 2018 with the imposition of a hike in insurance cost, which meant an increase by several thousands of rupees for two-wheeler customers. He added that he was only talking about motorcycles, and not the car industry.

This was followed by the implementation of safety norms, particularly the Anti-Lock Braking System (ABS), which imposed an additional cost of ₹8,000-10,000 on the customer. “So, you can imagine, during a period of less than a year, on a typical 150 cc motorcycle, that costs about ₹70,000, if somebody has to pay another ₹15,000, that’s huge,” he said. The increased price the manufacturers had to impose, owing to such measures, is bound to have a “huge impact” on the industry, he added.

On the BS-VI fuel emission norms, Bajaj said: “It would be very politically incorrect to say that BS-VI is not the right thing to do. Getting rid of old vehicles through a suitable mechanism would have been much more effective than squeezing out the last little bit of emission from BS-IV vehicles. But instead of doing that, we are going to impose BS-VI from April,” he said.

The price increase seen in most new BS-VI two-wheelers already launched vary between ₹8,000 and ₹10,000. This adds to the hike in insurance cost and cost of implementing ABS, Bajaj pointed out.

He said the GST rate on electric vehicles was reduced to 5 per cent, while internal combustion engine vehicles continue to bear a 28 per cent GST rate. He wondered if the government could “bring it down to, say 18 per cent, at least for a while, and then maybe over a period of 3-4 years, take it back to 28 per cent”.