High cost of acquisition due to a variety of reasons, including higher Goods and Services Tax (GST), which is higher than other major countries, is slowing down car demand and unless the Centre and States take steps to reduce taxes, the industry is unlikely to experience reasonable growth, Maruti Suzuki India (MSIL) said on Monday.

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Addressing shareholders in the company’s Annual Report for 2020-21, RC Bhargava, Chairman, MSIL, said the company’s performance in the next three quarters largely depends on how effectively all citizens follow the government’s advice to get vaccinated and observe safety protocols.

Covid-19 effect

“If we can avert the third wave, or substantially reduce its effect, and there are no further waves, economic activities and sale of cars can improve significantly over what was achieved last year. In March 2021 we were quite optimistic about the outlook for fiscal year (FY) 2021-22. The suddenness and ferocity of the second wave of the pandemic was a surprise to all and led to lockdowns and restrictions in most parts of the country. The first quarter sales were limited at 3,53,600 units,” Bhargava wrote.

He said the slowing down in the demand was largely because the cost of acquisition by consumers has increased due to various reasons like regulatory changes, depreciation of the rupee, increase in cost of raw materials and taxes imposed by the State governments.

“The GST on cars, based on the past rates of excise duty, is much higher than the GST (or equivalent) in all other major countries of the world,” Bhargava said.

He also said that Suzuki Motor Corporation Japan is giving priority to the development of technologies suitable for the Indian market, and research and development efforts are being accelerated. MSIL would also be fully involved in this work and Suzuki’s alliance with Toyota in Japan would prove very valuable for this effort.

On electrification and various green technologies, Bhargava added, “...I have no doubt that the large resources that are now being deployed for technology development will lead to lowering the cost of electric vehicles (EVs) and reducing dependence on Lithium, procurement of which poses some strategic issues of national importance."

Carbon footprint

Kenichi Ayukawa, Managing Director and CEO, said the company is following a philosophy of reducing carbon footprint with every new model introduction. For further reduction in CO2 emissions, MSIL is adopting a mix of powertrain technologies based on electrification and CNG, he added.

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“The company is strongly committed to reducing carbon footprint and has been working consciously for many years, irrespective of regulatory requirements. As measured by the CAFÉ (Corporate Average Fuel Economy) regulation, the company’s fleet has the least CO2 emission per vehicle among all car manufacturers in India,” he said.

 

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