Carmakers should report retail data, leave no scope to fudge: RC Bhargava, Chairman, Maruti Suzuki India

Most carmakers are still reeling under the after-effects of the slowdown, but not market leader Maruti Suzuki...

By:Updated: March 21, 2016 12:58:25 PM

Most carmakers are still reeling under the after-effects of the slowdown, but not market leader Maruti Suzuki. It is already racing ahead with profitability at record levels, market share touching new highs at 45% (passenger vehicles) and a slew of new products set to roll out. Yet, a tough test lies ahead. What is critical for the company at the moment is a shareholder approval for a deal that shifts the responsibility of building Maruti’s newest Gujarat plant to the Japanese parent Suzuki Motor Corp.

RC Bhargava, chairman of the company, in an interview with Roudra Bhattacharya, tells why the voting will get delayed even though it may not have any impact on the plant’s production timelines. Excerpts

You had earlier said that shareholders’ approval for Gujarat will be sought this month.

The vote may not happen by December — it is likely by January-February, but there is no date yet. The two officers dealing with our matter in Gujarat have both changed — the finance secretary has come here (to the Centre) as financial services secretary and the secretary of mines has become principal secretary. We still have to get changes made in our state support agreement (SSA). The new people have to be explained the whole deal before they clear it.

Since the investment will now be made by Suzuki instead of Maruti, the agreement will have to be changed in a manner that is equally favourable to Maruti. That has held up everything. In operational terms, it makes little difference since work at the facility is going on. We are investing right now and when the change happens the money will be reimbursed to us.

Among the major institutional investors, LIC is said to be not convinced yet.

LIC has not expressed any opinion; even if they have one, they have not told us. Actually, nobody has officially expressed any view — we will know the decision only when the voting happens. We can’t do anything till the contract manufacturing agreement is ready, which is what the investors will vote on. And the manufacturing agreement depends on the tax deal we get under the SSA.

The festival season has been a dampener…

The industry is yet to come out of the woods. There is just a little bit of growth and, that too, is being driven by Maruti, Hyundai and Honda. If you take out Maruti, the industry is declining. We have to wait till next year for growth. The last good year was 2010-11.

The over 20% growth of festival months will happen again if we get back to 7-8% growth for the economy.

There are discrepancies in the sales data reported by companies and actual retail.

The problem is that companies report wholesale figures, where they tend to push up numbers. That doesn’t mean cars are being sold — pushing them out to dealers is not sale and only the retail figures are relevant.

The only correct practice is to report retail, but the data are not available. Companies do not even have accurate data for retail and that leaves scope to fudge. The only correct way to report sales globally is registration data. I think we are almost there as most RTOs now have computerised systems. I think it is just a matter of time that this information is put out as sales data.

There have been many positives for the auto industry with lower excise rates and fuel prices. But interest rates remain high.

The way the auto industry is behaving, there is no option but to continue with the excise cuts. Also, Rajan (RBI governor) is a tough person and he won’t cut rates because there is pressure on him to do so. He has to take what he thinks is the right decision in terms of inflation.

I don’t know what the government will do when crude prices go up. Now that it is deregulated, you don’t have to go back to the old policy. With fuel prices now predictable and not subject to administrative fluctuations, we can plan production capacities better for the market.

There have been unconfirmed reports that Suzuki may merge the wholly-owned motorcycle arm with Maruti Suzuki.

What is in it for me? I am listed and I have shareholders, so unless I get something out of it I can’t do it. Any deal has to be in shareholders’ interest. We have not seen synergy yet. Vendors are common, and all we are doing is help them understand the ways in which we have reduced costs in procurement. The motorcycle management team is different.

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