Tax cuts to drive growth in small car segment, says Maruti Chairman RC Bhargava

In a conversation with ET Now, Maruti Suzuki Chairman RC Bhargava welcomed the government’s recent corporate tax reforms, calling it a landmark move that could provide much-needed relief to the auto sector.

When asked whether the new tax regime would bring “the butter back to the bread,” Bhargava was quick to give credit where it was due.

“Well, firstly, the congratulations are not due to me, the congratulation should be given to the prime minister and the finance minister for implementing such a huge reform measure just before Diwali. And you are right absolutely, I think that with this reform measure every one of us will see some butter somewhere on our plate and Maruti will also see that the gradually disappearing butter over the last five-six years will now come back,” he said.

The auto industry has been under severe pressure in recent months, with subdued demand and rising costs taking a toll. Bhargava admitted that while the tax cuts were timely, the short-term outlook remained constrained given the limited time left in the current fiscal.

“Well, we are talking of a very short time span. The festival season is upon us and there is only that much which can happen in this short period of time, you will appreciate that. This measure is not for one month or two months, this reform measure is a long-term measure which will impact on the economy as we go along. I expect that the small car segment which is about 70% of our total sales of Maruti will gather a growth rate of close to 10% a year going forward from now and the industry as a whole as a result of this growth in the small car segment will start growing at around 7% to 8% a year,” he explained.

On the issue of hybrid vehicles, Bhargava remained pragmatic, noting that the segment currently accounts for a very small share of Maruti’s overall portfolio.“Hybrids, electrics, these are small parts of the sales at the moment. They will all find their place. In many countries, hybrids and electric cars are taxed at the same rate. In India, we have given electric cars a prime position in the plan of getting to net zero. But Maruti has only a couple of vehicles in the hybrid segment. They are in the upper end. The volume is not very much. It would not affect the overall growth at all,” he said.With festive demand expected to provide some short-term tailwinds, Bhargava stressed that the real benefits of the tax reform would be visible over the long term, especially in the mass-market small car category where Maruti holds a dominant position.

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