Growth of the economy is not the entire responsibility of the central government – RC Bhargava

The chairman of Maruti Suzuki has confirmed that contracts for 3,000 temporary employees have not been renewed as the demand for new vehicles is on a decline.

By: | Updated: August 27, 2019 1:29 PM
Maruti seeks tax relief for hybrid, CNG cars Image: Reuters

R.C. Bhargava, Chairman of Maruti Suzuki India Ltd. has stated that the manufacturer has not renewed the contracts of 3,000 temporary employees. The move comes after the manufacturer is tackling rising inventory in the midst of the decline in demand for new cars in India. A Reuters report states Bhargava told shareholders at the company’s Annual General Meeting that safety norms and higher taxes have “added substantially” to the cost of cars, thus affecting their affordability.

At the company's AGM, R.C. Bhargava said that nine states have increased road tax by a substantial amount. All nine of these states saw a much sharper decline in sales compared to the states that did not hike the road tax. He mentioned that the growth of the economy is not the entire responsibility of the central government. "The State government, I believe plays a larger role than the central government. The state government taxation more to do in the cost of operating of the industry."

India’s auto industry has its sales decline for the night straight month in July 2019. This has resulted in many automakers like Maruti Suzuki, Hyundai, Tata Motors, Mahindra, TVS have reported that they have temporarily halted production and some have even laid off workforce amidst the slowdown.

As the auto industry is currently transitioning from BS4 to the more stringent BS6 emission norms. The rising input costs to upgrade engines to meet BS6 norms will help increase the cost of vehicles, especially with diesel engines. Thus, Maruti Suzuki along with a few other automakers have decided to discontinue their diesel offerings. While this is not only due to the rise in cost in investment to upgrade the engines and sales, the manufacturer will be required to provide reliable technology which will allow the vehicle’s Real Driving Emissions at a constant from 2023 which may not be possible without added cost for smaller capacity diesel engines. The Finance Ministry has announced measures to provide assurance and clarity for the industry and consumers highlighting the path for the transitioning from BS4 to BS6 in order to help the industry plan their production and assure consumers to generate a positive sales environment.

Now Maruti Suzuki has announced that it will shift focus to manufacturing compressed natural gas (CNG) and hybrid cars, with plans to increase CNG vehicles by 50% this year.

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