‘Many states’ decisions to encourage clean transportation about to be implemented’

New Delhi: Numerous states are on the verge of implementing decisions to encourage clean transportation, a move that aligns with broader national objectives to reduce greenhouse gas emissions and lower oil imports, R.C. Bhargava, chairman of India's largest carmaker Maruti Suzuki said in an interview to Mint.  Bhargava said incentivizing EVs is good, but only incentivizing EVs alone will slow down our “national carbon reduction goals”.

He added that the dominance of petrol and diesel vehicles has to be reduced in favour of vehicles with alternative fuels which offer lower emissions. 

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He expressed that the Uttar Pradesh government's directive to waive road tax on hybrid cars would negatively impact the sales of petrol and diesel cars. "I hope there is an adverse impact on petrol and diesel sales. We need to transition to cleaner technologies. As a country we cannot hope to keep selling more polluting cars," he said, emphasizing that taxation policy should be built on the premise of reducing reliance on traditional fuels. 

Lower retail, higher discounts

Bhargava also addressed current market conditions, noting that retail sales have been affected by the heatwave in June but are expected to normalize in July. "The heatwave conditions were primarily responsible for the lower retail sales in June. Now that situation has gone, we are in July, and I expect sales to get back to normal," he said.

The automotive industry is experiencing increased discounts due to inventory pressure. "Every company today has increased discounts because of the inventory situation. There is greater supply than demand, and demand and supply determine pricing," Bhargava explained. He mentioned that manufacturers are adjusting production to manage inventory levels, which is a normal business practice.

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Despite the temporary dip in sales, Bhargava is optimistic about the overall economic environment. "The economy is continuing to do well. The stock market is in a very bullish phase, which is always good for car sales," he said. Bhargava pointed out that favourable monsoon conditions and overall economic stability are positive indicators for future car sales.

Navigating margin pressure and pricing strategies

Regarding margin pressure and pricing strategies, Bhargava noted that competition and efficiency will play significant roles. "The more efficient manufacturers, those with cars that have better acceptance by customers, will ultimately thrive," he said. He also highlighted the challenge for domestic OEMs in controlling EV prices due to high import content, making cost-cutting difficult.

Policy focus beyond budget matters

Bhargava highlighted that the UP government push for cleaner transportation is not a new development but a long-standing EV policy decision which is only being implemented now. "Many states have taken decisions which are about to be implemented. It's not as if this is a sudden decision. UP's decision was actually taken way back in 2022," he said. Bhargava hopes that more states will adopt measures to promote cleaner transportation technologies, including compressed natural gas, biofuels, hybrids, and electric vehicles (EVs).

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When asked about the role of the budget in promoting alternative fuels, Bhargava clarified that these matters fall outside budgetary decisions. "These are all things which have to be done outside the budget," he said, adding, for example, that Bhargava noted that CNG vehicles, for example, are treated similarly to petrol or diesel under the GST regime, but that the GST Council can consider differentiating CNG due to its cleaner emissions.

Bhargava emphasized that both state and Union government policies should focus on reducing the dominance of pure petrol and diesel cars. "Policies and actions should be directed towards ensuring that technologies which reduce oil consumption and greenhouse gases are incentivized over pure petrol and diesel cars," he said.