Maruti says millennials prefer gadgets to cars

There’s no point in a temporary cut in GST rates, says Bhargava

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 RC 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 a new vehicles during the initial years of their careers.

On being asked about how the auto sector will perform in the next five years, Bhargava said, “We want contribution from manufacturing (sector) to reach 25% of GDP by 2025 and today, it is may be around 15% of the GDP. That means manufacturing sector needs to grow faster than the overall GDP to reach the desired target. If GDP growth itself has to grow by 12% a year to reach the $5 trillion target, then manufacturing will have to grow by something around 17-18%.”

He added, “To grow manufacturing at that rate, then demand for manufactured products also must increase at that rate because unless the customers can buy the product, then the production cannot happen. As automobiles are 50% of the manufacturing GDP, then the sector has to grow by 15-16% per year to propel manufacturing sector to reach 25% of GDP. If customers cannot buy products at this rate, then how will it happen? We have economists everywhere, but where have they worked out this affordability and growth related to affordability?”

Today, a youngster has so many options of what he can do with his money, that a lot of them prefer other options than buying a car because he can still get his mobility through a car from Ola and Uber which is much more economical. So, what the finance minister said is 100% correct. That is what the millennial generation is thinking. RC BHARGAVA, Maruti Suzuki India, chairman