Budget 2016: Pointing towards the low demand in the rural markets and increase in the taxes levied on the different types of passenger vehicles, R C Bhargava, chairman, Maruti Suzuki said that it will be a challenge for the automobile industry to achieve double digit volume growth in the next fiscal year.
“It is a challenge for the automobile industry to grow in double digits unless we receive a healthy monsoon, the demand in rural areas improve and the economy starts to grow at 8.5%,” added Bhargava while speaking to a business news channel.
Bhargava also said that the additional taxes on diesel and small cars in Budget 2016 is unexpected. There is a lack of understanding pertaining to pollution in Delhi. Passenger vehicles are likely to get more expensive as the government announced that it will levy 1% infra cess on petrol cars, 2.5% on diesel and 4% big cars like sports utility vehicles in Budget 2016.
Bhargava opined that vehicles are expected to become more expensive due to the infra cess and the manufacturers can afford to absorb it once the demand situation improves especially in the rural market.
Recently the petrol prices were reduced by Rs 3 and the Maruti veteran thinks that the reducing price gap between petrol and diesel will attract more customers towards petrol cars.
At present diesel cars constitute 30% of the total volumes for the Delhi based vehicle manufacturer.
The union government also announced 1% tax at source for luxury vehicles priced above Rs 1 lakh which is likely to increase prices of bigger vehicles. Bhargava thinks that this additional tax will not hit Maruti as they did not have much products in the above ten lakh range.
The Maruti chairman also said that the dollar has gone up against the rupee, so that does have an impact on imports.
Maruti’s imports from Japan have reduced but not much possibilities of indigenization have been fulfilled as major reduction in exports to Japan are yen denominated, so that will offset the imports.