Maruti Suzuki chairman RC Bhargava, in an interview, blamed the purchasing power of the domestic buyers, especially youngsters, for the fall in automotive sales in India. He added that India’s automakers are on par with Europe and America in terms of quality, however, due to increased product prices, cars remain unaffordable.
He also highlighted that India’s per capita income is almost around $2,200 per annum, compared to around $40,000 in Europe. In terms of the cost of vehicles, Europe and India are at the same level. In addition, Indian also have to pay extra taxes such as Goods and Service Tax (GST), road tax and other, which higher than what Europe and China levy.
The interview was in reference to the double-digit fall of automobile sales in this quarter. The Society of Indian Automobile Manufacturers (SIAM) revealed, on September 10, that monthly passenger vehicle sales have plummeted 31.57% year-on-year (YoY), registering sales of 1.96 Lakh units in August. Auto sales have been falling consecutively for the last 10 months.
The sale of passenger cars fell by 41.09% YoY, registering the sale of 1.15 Lakh units. The industry body also said that this was the worst period for automobile sales since 1997-1998. This fall had also put around 1 Lakh people out of jobs.
In a subsequent development, finance minister Nirmala Sitharaman on September 11, had clarified that higher taxes aren’t the only factors contributing to this fall. She blamed millennials’ preference for Uber and Ola cabs for the fall.
Backing Sitharaman’s statement, Bhargava listed various issues with the current economic situation that deter millennials from buying their cars, causing the fall in automotive sales in India. These included:
- The inability for the young generation to buy cars from their initial salaries
- The inability to pay loans, incase a car loan is taken
- Too many things to spend on, and limited money
Bhargava, highlighting the importance of the automobile sector and said: For manufacturing sector to reach 25% of the GDP by 2025, the sector needs to grow faster than the GDP. Currently, the manufacturing sector is around 15% of the GDP. If the GDP has to grow at the rate of 12% to reach $5 Tn, then the manufacturing sector would have to maintain a 17-18% rate. Since the automobile sector accounts for 50% of the total manufacturing GDP, it has to pull its socks up to grow at 15%-16% per year, he said.