Wednesday, Sep 24, 2014

‘Additional safety features will push up costs. Buyers will exit’

Written by Mihir Mishra | Posted: February 24, 2014 3:13 am

The growth of the Indian auto industry would depend a lot on the policies to be formulated by the next government at the Centre, says Maruti Suzuki chairman RC Bhargava. In an interview with Mihir Mishra, Bhargava says that making cars with higher safety standards than those specified today would make them unaffordable for many. Excerpts:

The excise cut must have come as a great relief for the auto industry, struggling with declining sales…

Yes. But the question is how long would it last? This time we will have to compensate dealers for the cars that were delivered to them at higher excise duty and will be sold at the reduced prices. That is a big cost and, if this goes away after three months then it does not help us because extra cost incurred to compensate our dealers may not be compensated by extra sales. Frequent changes in policies and tax rates are not good for the industry. We need stability of policies.

Where do you see the car market moving in the next five years?

It all depends on the policy that the next government will formulate.It was announced recently that Gujarat manufacturing plant would be built by Suzuki and not by Maruti Suzuki, which was the plan earlier. This has not been accepted well by the markets.
There is still no clarity in the market about what we are doing. I do not blame the market as well. People find it difficult to believe it that a foreign multinational would set a no-profit no-loss subsidiary in India because no other multi-national has done it. To them it seems to be too good to be true. I have explained the benefits of this arrangement, which the market did not fully appreciate. Under this arrangement, the cars we buy from Suzuki at all times will be priced lower than what we ourselves would have made it. So, I always stand to gain through this arrangement. In addition, I would not have to invest my money and that would be utilised for expansion.

Recently, a lot of cars failed safety tests. Shouldn’t you be making safer cars?

Fine, we will do all of that. Then a large number of people would not be able to buy those expensive cars and will have to do with a two-wheeler. Which is safer for him? Will his family be safer on a two-wheeler or a car that does not meet those high standards of safety. Our cars today meet European standards and Indian standards, which are based on European standard. You want even higher standards. At whose cost will it be? The push can come from carmakers, who can decide to offer basic safety features even on basic models. It could be like the automatic transmission (AT) feature in your new Celerio.
Cost. Who is buying the AT model? The guy who has money. The guy who is buying his fist car will not buy an AT. If 51 per cent is AT, 49 per cent is also not AT. Who continued…

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