Interview. The auto industry will grow at about 5-6% per year: RC Bhargava

Overall, I think the growth of the auto industry in India slowed down a lot in the previous decade... last four years, because of Covid, the semiconductor issue and all that.

In 2022-23, the industry got ahead of its previous best performance year; that was four years ago. So, now we are where we were 3-4 years ago. But, the signs going forward are that the industry will grow at about 5-6 per cent a year as a whole.

There are still problems in some isolated areas... it’s not a widespread problem, not as big as it used to be. Things have improved significantly. But yes, there are some areas where there is a shortage of certain kinds of semiconductors.

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At Maruti Suzuki, we expect that after the second quarter of this year — which means from October onwards — we should be more or less on a normal footing as far as semiconductors are concerned.

I think during the Covid period, the industry suffered setbacks, and expansions did not take place. The entire demand on the semiconductor industry on the other hand, grew very fast because there was a big expansion of use of technology in areas such as communication systems.

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The technology changed faster than in the past. As a result, the industry (auto) was not able to cope up with the growing demand. I think there is an issue also of better coordination between the manufacturers and tier-1 vendors and the designers of cars on getting to understand these things well in advance.

We have seen in the last four years that for various reasons, the demand of cars in the lower segment or entry-level segments or just above the entry-level segment, has slowed down significantly, and as a result some car manufacturers have already gone out of production in that area.

We have had to slow down our production there, but we are also now looking as to what should be our capacity planning and therefore, the requirement for (more) facilities, organisations and such things.

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Going forward, it seems that the growth of the small car market/ low-end of the market will be significantly slower than what had been in the past. Whereas, the market for the bigger and the more expensive cars will continue to grow.

So overall, we will not get to the double-digit growth which we were having in the period between 2000 and 2010. I don’t think that era is coming back soon, unless there are again, some changes in the entire system.

People who are buying small cars are the people who are upgrading from two-wheelers. That segment of population has not gone away. That segment has lost its ability to buy cars in the same speed and the same time they were upgrading earlier.

The other (higher) segment is continuing to grow, so relatively yes, SUV segment is growing faster, but as I said, earlier on, volumes were driven by the smaller segments.

That has dropped and that is why the overall growth rate has come down from earlier figures. That’s why we may see just about 5-6 per cent growth a year.

We have just added four new SUVs and the next few years, we will accomplish launch of electric vehicles, and they are all in the bigger (expensive) segment.

They are not going to be high volume vehicles. The smaller segment has slowed down but that doesn’t mean that volumes have become very small or insignificant... the volumes still run into lakhs and lakhs of cars per year.

The EV numbers are not growing too fast compared to the rest of the industry. So, it’s not as if the EV segment has started galloping ahead.

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But, it’s growing and it continues to grow and all of us will continue to add a model in the EV segment. But, the government has also said there are other options/ alternative fuels which they are encouraging.

The government is clearly encouraging CNG and as you know recently, they reduced the prices of CNG by up to ₹8 a kg, and that has made an impact in the market.

A recent report (by a panel), chaired by ex-secretary at Petroleum Ministry, also recommended the hybrids as one of the technologies for some years before we get into more cleaner forms of energy.

I don’t know about this policy about diesel being phased out from the bigger cities from 2027.

In any case diesel cars are becoming expensive because of the regulatory requirements of emissions and road testing and such things. So, I don’t think diesel is going to be a major driver of growth in the coming years anyway.