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There are contradictions in economic terms in growing SUV sales by a higher percentage when this does not happen for small cars, the revenue secretary said on Wednesday at the Manufacturers’ Society’s 61st annual convention. Indian Automobile Industry (SIAM).

New Delhi: Revenue Secretary Tarun Bajaj asked the auto industry to do more analysis to understand why car sales are not increasing.

There are contradictions in economic terms in growing SUV sales by a higher percentage when this does not happen for small cars, the revenue secretary said on Wednesday at the Manufacturers’ Society’s 61st annual convention. Indian Automobile Industry (SIAM).

GST rates range from 28% for a small hybrid vehicle to “very high” for SUVs, as well as the compensation tax, Bajaj added.

RC Bhargava, President of Maruti Suzuki India Limited (MSIL), said: “Yes, people have turned to SUVs, but this category of people is the one for which a few thousand rupees does not matter. “

India’s auto industry has been under pressure and experienced a deep structural slowdown across all segments even before the COVID-19 pandemic hit the industry last year. However, the SUV segment in passenger vehicles has grown in recent years with the arrival of new products and innovative technologies in the market.

In calendar year 2015, the SUV segment contributed only 13.5% to overall passenger vehicle sales in India. This number increased to around 26% in CY2019 and 29% in CY2020.

Looking at vehicle sales figures, Bajaj said that 2017-18 and 2018-19 were “glorious years” for the automotive industry – with the exception of passenger vehicles, commercial vehicle sales increased by 10%, three-wheeled vehicles increased by 30% and two-wheeled vehicles were up 16%. “The industry was doing well at one point, so I have to understand what changed so drastically after 2017-18 that sales fell. “

There are economic contradictions in rising SUV sales, not small car sales: Revenue Secretary

Car sales are picking up, but utility vehicles and three-wheelers are facing “peak weight” and sales are not picking up even as direct tax collections increase, Bajaj said.

The Revenue Secretary asked if it was the global economy, the COVID-19 pandemic and other things that had disrupted the functioning of the auto industry or just existing tax rates.

“Is it the GST rates, the high rates as you call it, that came in in 2017-18? I also want to understand, before the GST, in the big states where more cars are sold, like Maharashtra, Tamil Nadu, Karnataka, Delhi – what was the tax structure at the time? Was the tax structure less? I think it could have been a little higher, ”he said.

There have been ups and downs in auto sales in recent years, but the general trend has been downward, Bhargava said.

He added: “GST rates are more than double in India, compared to the EU, Japan or the US, and given the lower income levels in India, the question of affordability arises. pose. The GST is not the only thing. States have the single road tax, which adds an additional 8-9% and raises the overall tax rate to 37% to 38% on cars. Do we need the kind of high taxes that we have? “

Venu Srinivasan, chairman and managing director of TVS Motor Company, said that a two-wheeler which is “the basic mode of transportation for the country” is taxed at 28% GST, the highest and at a level equal to that of a luxury product. “The switch to BS-VI, the increase in the cost of ABS, the Supreme Court ruling on compulsory purchase insurance and a one-off tax have pushed up the prices of two-wheelers.”

According to Bhargava, the government has made many statements about the importance of the auto industry. “But in terms of concrete actions, which would reverse the downward trend, I haven’t seen any action on the ground.”

“I’m afraid words will get us a lot of talk about additional sales, but you need concrete action to make that happen,” Bhargava added.

He also said that if the auto industry is supposed to stimulate the economy and manufacturing sector, the car penetration rate in India will drop from 25 or 30 per 1,000 to even 200 per 1,000 cars and will need to be manufactured. millions of cars every year.

“Are we sure we have enough customers in India who can afford these millions of cars every year?” Are Income Growing So Fast? Are Jobs Growing So Fast? I think these aspects are often overlooked when we make our plans of what we’re going to do and what’s going to happen, “he said.

According to Bajaj, direct tax collection increases by 40 to 50% and collections are expected to be better this year.

“While I don’t deny that there has been unemployment, in a class of people who would be your buyers, income levels are increasing. If people’s income levels are increasing, why are car sales not going up? Whether it’s just the price elasticity or if there’s something else? I think SIAM should do a more in-depth analysis of that fact and come back to us to tell us what changes you need, ” Bajaj said.

This is not a “simple intervention” to cut taxes that will benefit car sales. There is a need to have a 360-degree view of the policies needed to support this industry, the revenue secretary said.

He noted that the government faces many criticisms of the high excise taxes on fuel. However, she also needs the income to balance her budget as she cannot afford to continue borrowing at high levels each year.

“If we continue to borrow this money and relax in other areas, it will come back to haunt us later.” Inflation will be so high, prices will go up. You will then notice that the prices of your raw materials which have already gone up will go up further, ”Bajaj said.

“The point is, any policy cannot focus on just the fact that we want auto industry sales to increase, without even knowing whether changing that would actually increase sales,” he added.

Bajaj also urged the industry to forge ahead and keep pace with technological change.

Bhargava said he supports vehicle safety, cleanliness and electrification, but this should not come at the expense of affordability for consumers. “I don’t think the auto industry will revive with internal combustion engines, with CNG and biofuels or electric vehicles unless we address the issue of the affordability of cars for the customer,” a- he declared.

“After adopting all the European safety and emissions standards that we have in the past two years, the cost of vehicles has increased dramatically. Given the lower income level in India, the question of affordability arises. when you expect people to buy cars which in terms of all features are similar to their European counterparts except our tax levels are much higher, ”Bhargava added.

Giving an example, he said that due to new safety regulations, the company had to do without the Maruti 800 model, which drove the motorization of India. “We have seen that small increases like what happened two years ago can lead to lower growth in the automotive market. The new regulations for BS-VI have again added 22,000 INR to a car, making cars unaffordable “.

According to Venu Srinivasan, there is no point in promoting electric vehicles because lithium itself is a scarce resource and it causes a lot of pollution both during its extraction and disposal. “We will also have to look at the amount of energy required over the next 10 to 20 years,” he said while adding that even if he supported electric vehicles, it would not necessarily lead to a green economy and durable if we do not solve the related problems. problems.

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In the process of developing regulations, policymakers often fail to take into account the economic situation of potential customers, he said.

“In all four segments of the industry – passenger vehicles, two-wheelers, utility vehicles and three-wheelers, the long-term growth rate has declined dramatically over the past 5-10 years before COVID even started.” , president of SIAM says Kenichi Ayukawa.

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