States should also help automobile sector to meet Centre’s aim of reaching $5 trillion economy: Maruti Chairman

S Ronendra Singh New Delhi | Updated on August 27, 2019

RC Bhargava, Chairman, Maruti Suzuki India

Maruti Suzuki India (MSIL) Chairman, RC Bhargava, on Tuesday said that the states should also help in promoting manufacturing to meet the Centre’s aim to reach $5 trillion economy in the next five years.

He said it is time for the state governments to become partners in making manufacturing industry grow and recognise the importance of its role in the overall automobile industry.

Competitive manufacturing

“A number of steps have already been taken to promote investments and growth of competitive manufacturing. However, more needs to be done if the target of manufacturing contributing 25 per cent of the GDP by 2022 is to be achieved. This would also be an important step towards the goal of a $5 trillion economy,” Bhargava said here at the company's 38th Annual General Meeting (AGM).

He said the taxation of the state governments is quite higher. For instance, petrol tax is much higher and the affordability of a car is very much determined by the state government, which in turn has much to gain or lose from how the industry grows.

Road tax

Citing example, he said there are nine states where road taxes have been hiked thereby resulting to increase in vehicle costs by as much as Rs. 97,000 (per vehicle) which has “affected ability of customers” to buy new vehicles, leading to drop in sales.

Efforts of the Central government can get derailed if some of the states don’t recognise the important role they have to play in making this happen, Bhargava said. Sighting an example, he said, “The Finance Minister has communicated with the banking system and now we are seeing the reversal of that. One of the favourable things that has happened is that the financing costs (of automobiles) are coming down.”

Opportunity to review

Talking about the overall slowdown in the market, he said such occasions while posing challenges also provide an opportunity to review “what we are doing and to find ways of becoming more efficient and cost-effective”.

Assuring the shareholders, he said that MSIL is doing exactly that, such as reducing cost, become more efficient, strengthen marketing strategies and give customers more value. Towards this end, the expansion of the service and sales outlets in rural areas continues to be given priority, he said.

“The slowdown in the second half of last year resulted in your company not being able to meet its initial estimate of double-digit growth for the belief is that we are near the bottom of the downward cycle and the economy, and car sales should start to accelerate in the near future. The fiscal 2021 should again see your company coming back to its usual rate of growth," Bhargava told the shareholders.

On job cuts, he said the company had not renewed the contracts of 3,000 temporary employees, as they battled rising inventory amid a slowdown in demand.

Published on August 27, 2019

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