There’s no point in a temporary cut in GST rates, says R.C. Bhargava
Bhargava says the buying power of Indian consumers has not risen in line with the increase in car prices
New Delhi: Ride-hailing companies such as Ola and Uber have hit demand for new cars in India as young buyers don’t need to buy cars for commuting and can spend most of their income on electronic gadgets, said R.C. Bhargava, chairman of Maruti Suzuki India Ltd, the country’s largest carmaker.
Bhargava’s latest statement supports the contention of finance minister Nirmala Sitharaman who cited millenials’ unwillingness to buy cars as one of the reasons for a slump in sales.
Bhargava, a former bureaucrat, said there is “no point" in a temporary cut in the goods and services tax (GST) on vehicles as it would not help the industry in the long run. He said the introduction of stricter safety and emission regulations would improve the quality of vehicles produced in India and put them on a par with those in Europe.
Bhargava said the buying power of Indians has not risen in line with the increase in car prices, leading many to postpone purchases as car prices have been increased to adhere to new norms.
“The per capita income in India is almost around $2,200 (per annum) and in Europe, it is approximately around $40,000. In terms of all standards, which add to the cost of the product, there is no difference between Europe and India," Bhargava said. “In addition, the taxation levels in India, whether it’s in terms of GST, road tax and others, are much higher than in Europe or even China for that matter. How do you expect a country with such a low per capita income to have enough customers to have the capacity to pay for a car and grow at 10-15% every year?"
Passenger vehicle sales in the world’s fourth-largest automobile market have slumped in the past year as lack of financing options, increase in ownership costs and an economic downturn have discouraged people from buying cars.
Bhargava said Sitharaman “is correct" in saying that the youth are opting for Ola and Uber rather than buying new vehicles during the initial years of their careers.