[AutoNoob]

Source: The Economic Times

At a time, when the auto industry body Society of Indian Automobile Manufacturers Association (SIAM) has requested for a cut in goods and services tax (GST) to revive falling sales, RC Bhargava, chairman of the country’s largest carmaker Maruti Suzuki, has opposed such a demand, arguing that the government cannot afford to reduce taxes.

“There's too much investment required not only in infrastructure but in promoting inclusive growth,” said Bhargava. “The government cannot cut back on its revenue and thus cut back on all its social programmes — that's not correct; I don't support it at all.”

As socialist, I may agree with him regarding the responsibility government is having.

But the enthusiast in me disagrees with him as the cars in India as very heavily taxed (upto 60~65% in some cases). This results in lower margins for manufacturers and that results in shoddy / out-dated products for us. His own company is making tin cans instead of safer cars because they know customers can't afford. So, in a way, due to high taxes, even safety is compromised.

Government revenue problem is not going to be solved by high taxation on automobiles as it's just a fraction of total government revenue. The key issue is poor recovery from the people/ industry who should be paying taxes but manage to evade. Returns for Government will be much better if focus is shifted in that direction rather than the easy target - cars.

[Turbanator]

Originally Posted by AutoNoob

As socialist, I may agree with him regarding the responsibility government is having.

But the enthusiast in me disagrees with him as the cars in India as very heavily taxed (upto 60~65% in some cases). Th

If I am not mistaken, most of Maruti cars are under lower Tax bracket due to 4 Mtr/ Engine capacity rules. So, I guess, he is just trying to save his company more than anything else. If the taxes drop on the higher category, differences will undoubtedly reduce, and Maruti market share can drop.

If we ignore the Company owned cars, a regular guy first pays 35 % or so Income Tax, Is it fair to charge over 50 % GST and 12 % road Tax complimented with 9,5 % Interest rates

[ashlil]

My question is, why cannot the manufacturers reduce the price of the car? They want the government to take all the burden while they pocket all the profit! Indian cars are grossly overpriced. Manufacturers are not passing the benefit of low cost of production to customers. Case in point, the i20 S connect costs 9.64 lakhs in the UK (excluding VAT). In india the i20 asta (o) costs 8.21 lakhs (ex showroom). And the UK i20 has lots and lots of features with never-ending list of safety acronyms (certainly worth more than 1.4 lakhs difference).

What is the guarantee that the car manufacturers will pass on the benefit of taxes to the customers, when they never passed on the benefit of lower cost of productions? All this crocodile tears regarding slowdown in sales seems very dishonest to me. Basic economic principle states that if there is less demand, reduce price to create demand. So, reduce price already! Stop blaming the government for the results of your own greed.

[Thermodynamics]

Originally Posted by ashlil

Indian cars are grossly overpriced. Case in point, the i20 premium nav costs 10.7 lakhs in the UK (excluding VAT). In india the i20 asta (o) costs 9.31 lakhs (ex showroom). And the UK i20 has lots and lots more features than i20 asta (o), with never-ending list of safety acronyms.

Buddy, your example already has the answer. i20 ex-showroom (9.31) has got 33% GST in it. It is unfair to compare 9.31 (including GST) with 10.7 (excluding VAT). The fair number is 9.31/1.33 = 7 Lakhs. The UK model is being sold at 50% higher price for the features it differentiates.

Originally Posted by ashlil

Basic economic principle states that if there is less demand, reduce price to create demand. So, reduce price already! Stop blaming the government for the results of your own greed.

If we look into the history of our neighbor China's automobile market, whenever there was a slump, the Government was prompt in giving out a stimulus. This is because, the automobile segment is like a mother industry. There are a plethora of auxiliary industries and petrochemical industries which flourish based on the size of Automobile market. All put together, the kind of employment it generates and the contribution to economic growth is way beyond just Automobile sales. There is a thin line between pruning and uprooting, you simply cannot kill the goose that lays golden eggs.

Originally Posted by Turbanator

If the taxes drop on the higher category, differences will undoubtedly reduce, and Maruti market share can drop.
If we ignore the Company owned cars, a regular guy first pays 35 % or so Income Tax, Is it fair to charge over 50 % GST and 12 % road Tax complimented with 9,5 % Interest rates

+1 , add to that a 100% tax on fuel and 1.5 Rs/km of toll charges.

[anjan_c2007]

I think Mr R.C. Bhargava needs to think right. He is 84 plus and will turn 85 by July 30, 2019. A career bureaucrat (ex- IAS if I am not wrong), he is with Maruti since 1981 and is perhaps the only executive who has seen the company grow from the open industrial plots in Gurugram, Manesar (both in Haryana) and Sanand, Gujarat, to brick and mortar, to assembly lines, to becoming India's automobile market leader and to becoming the main source to ring cash registers for its parent Suzuki Motor Corporation, Japan and so on.

He knows the pulse and most of the intricacies associated with the Indian automobile industry since the Ambassador - Premier years and later wef 1983 the Ambassador-Premier-Maruti years and the post 1995 Daewoo- Opel- Mercedes- Ford years, till the present.

Our automobile industry is being excessively taxed since ages, the four wheeled private cars bearing all the brunt. Commercial and agricultural vehicles and two wheelers, have over the past few decades, due to mercy from our ruling class progressively attracted lesser taxes.

We are losing safety features in our cars as manufacturers desist from installing these, in many cases to keep the prices competitive. Though I will not rate the car manufacturers as "committed to safety" as they have made merry all these years, due to absence of any mandatory laws and presence of loopholes in such matters. With the huge taxes levied at the Central and State levels (State GST, Central GST) and thereafter registration fees, road taxes and insurance, the on-road price of a car becomes unrealistically high. If better safety features are added (European NCAP specifications) to a Maruti Swift, it's on-road price in India will cross Rs 10 lakhs. The Indian made and exported Swift has an Euro NCAP four star safety rating for the U.K. market, whereas we had to be contented with a ZERO. Similar is the story of the Renault Kwid, which is exported to Brazil with an added weight of 130 Kg and lots of safety features.

Post on teambhp.com by carmayogi:-

I just came across a news article which states that the Renault Kwid in the Brazilian market will weigh 20% more than the Indian one. This export version is made in India, for crying out loud!! It reportedly has structural upgrades for better safety in the monocoque as well as individual parts.

I am completely distressed by this news. Firstly Renault has been a pioneer in crash safety with some of the first ever Euro NCAP 5 star cars back in the day. Secondly, the Indian plant is obviously capable of producing safer cars than those being sold to us.

Are we completely stupid as a country to accept such blatant discrimination? That too based on safety? I am ashamed of our government, legal system and, especially, the auto manufacturers in India. Can anything be done by people like us on team-bhp? My heart goes out to the countless dead and injured in preventable circumstances.

Article link: http://indianautosblog.com/2016/07/r...heavier-237155

The teambhp link to the above post:-

https://www.team-bhp.com/forum/road-...heavier-6.html (Renault India builds a safer Kwid for Brazil - 130 kilos heavier!)

Quote from Indian autosblog:-

The India-spec Renault Kwid weighs 650 kg, whereas the Brazilian Kwid tips the scales at just under 800 kg, as per the Brazilian publication's report. Multiple safety improvements are being reasoned for this increment. The monocoque structure has been strengthened, and front airbags, side airbags and ABS are standard across the range. Renault has gone so aggressive for bumping up the safety, that even the Brazilian model's driver's seat weighs 9 kg more than that of the India-spec model.

The India-spec Renault Kwid doesn't even offer dual-front airbags, let alone side airbags. Only driver airbag is available, that too optionally on the top-end variant. However, the price factor also comes into the picture then; while prices in India start at just INR 2,62,113 (ex-showroom Delhi), the prices in Brazil will reportedly start from around R$30,000 which converts to INR 6,08,631.

The ex-showroom price of the Renault Kwid quoted above viz. Rs 262,113 (ex-factory) is exclusive of many taxes.

Mr Bhargava at this age should realise that the unsafe Marutis and similar other Indian-made cars with a big ZERO stars "proudly scored"in the recent years' NCAP crash tests, are perpetually injuring and killing thousands of occupants in road accidents, due to lack of safety features and due to the ZERO NCAP safety rating that most of these models "proudly excelled in" during recent years.

It is time to bat for lesser taxes, so that requisite contemporary safety features are mandatorily added to private cars. Cars with BS VI compliance and the soon to come Bharat New Vehicle Safety Assessment Program (BNVSAP) mandatory stars, will hence have affordable prices, without these hitting the roof. The crash test BNVSAP rating for Indian made cars' deadline, is fast approaching and all our till date "ZERO RATED" automobile makers will need to comply.

[pratika]

As others have pointed out, this doesnt seem like an innocent point of view. There is definitely conflict of interest here. More so with currently declining sales. If Maruti feels generous, they are free to contribute more money to govt's kitty.



FWIW, this same guy was also against making safety features such as ABS and airbags mandatory. Here is a team-bhp link to the thread https://www.team-bhp.com/forum/road-...tatements.html.

[GTO]

Well, even as a car enthusiast, I support the high taxes on cars. For one, with less than 5% of the population owning a car, it is still a rich man's item. Our car penetration levels are woefully poor at 30 - 40 cars / 1000 citizens. Second, a car is the rare big ticket item that MUST be sold in white money (unlike property & marriages, where black cash is used). Lastly, <2% of Indians pay income tax. Am sure the government will happily reduce taxes if more people paid income tax!

[arjab]

Just thought of sharing another set of views as shared by Bhargava.

Source:
https://www.livemint.com/auto-news/m...827699999.html

[GrammarNazi]

Originally Posted by arjab

...Source:
https://www.livemint.com/auto-news/m...827699999.html

Notice how the market leaders compare per capita GDP of Indians vs Europeans but deliberately avoid discussing the actual price the final consumer pays for Indian cars compared to European markets despite the income disparity.

Their next lame excuse is that the size of market is larger there, well if the prices that consumers pay are rationalised comparatively then the market here too is sufficiently large (that too with much lower labour cost).

Suzuki launched the Swift facelift LAST in India, which is it's largest market. Doesn't this indicate their priorities ?

The sheer contempt market leaders hold for Indian consumers shows thru in these comments. This contracted market will eventually bounce back, but these views indicate that the govt is right in taxing them.

[OrangeCar]

My only concern.. only concern is -

If Govt. reduces taxes, car companies may pass them on temporarily.

But I am certain, if past history is anything to go by, car makers will slowly raise prices citing various reasons, most popular among them is increased input costs, and wipe out this tax reduction passed on by Govt.

Even worse, if a new product gets launched, it will launch at a much higher price, taking advantage of lower taxes.

And at a later point, Govt. will not be able to raise (difficult to raise!) taxes to a higher slab on cars.

In essence, who gains? Car makers in the long run. Losers - Govt. (which is nothing but representation of people), and people.

[VKumar]

Mr. Bhargava seldom says something which I would want to agree on, this is one of them. Tax cut demand is nothing but a long term strategy of car makers to milk the public even more.

We have had manufacturers in past who had cut down the prices of the cars by more than 10%:

• Ecosport (And ford is profitable now, imagine the margin they were earning back then)
• S Cross 1.6
• Honda Jazz

That have already shown us their true face once, let's not forget that. We are fine for what we pay to buy the cars and we are still buying, aren't we?So, the focus of the car makers should be on providing us the products we would want to buy, let us take care of our taxes and expenses by ourselves. India became the fourth largest auto market with all those taxes prevailing since long, give us better cars and service them well, other things we will take care of.

[CrAzY dRiVeR]

“The government needs money, else as we have seen in the past, many things will suffer" - Bhargava

Should prices increase because of heavy taxation? No.

“The guy who rides a two-wheeler wants to upgrade to a four-wheeler. But he’s unable to do so in terms of his financial capacity" - Bhargava.

How do you reduce prices when taxes are high?

"Onus to reduce prices is not on the government; manufacturers must cut costs to lower prices" - Bhargava

So generous Mr. Bhargava. Thank you, Maruti! But how do you achieve this?

"But when it comes to regulations, everybody in India says we must have the best regulations … you have to look at the affordability of a product considering the Indian level of incomes and not somebody else’s level of income.” - Bhargava

So basically, the government shouldn't lose money, Maruti shouldn't lose money, sales of cars shouldn't come down - the only compromise should be on the quality and standard of cars we are getting for the price. . Regulations and standards have to be kept low always to allow cars to be sub-standard as compared to the rest of the world.

Basically - Neither will Maruti build better cars, nor will it allow others to do so! Or am I wrong in interpreting Mr. Bhargava's logic?

[neil.jericho]

“I think the most important thing is that why is there a slowdown. Why have customers stopped buying cars as they were buying before. One part of it is was the financial thing and to some extent, because of the intervention by the Centre, that is beginning to change... the attitude of the banks has certainly become much more favourable... But the price problem still remains. And it is to a large extent because in the last few months nine States added substantially to road tax,” Mr. Bhargava said.

“The State governments have to realise that this industry is unable to bear this kind of heavy taxation, which they don’t because, in many cases, the officers concerned seem to think that car is a luxury product capable of bearing any amount of taxation. It isn’t, which we have seen now,” he said.

Errr the same R C Bhargava seems to have had a change of heart and is now blaming increased state taxes for the slowdown.

Link - https://www.thehindu.com/business/ro...le29452329.ece

[KMT]

A majority of govt babus framing the GST (@ centre) and Road Tax (@ state) laws will be immune to tax rises as the government will be paying for their office cars ( ie staff cars which are often used for private duties).

There seems to be a degree of jealousy/vendetta that pervades in the corridors of power against private wealth/success.

This sentiment came through very clearly in the tone in which our honourable FM said that rich Indians (&FIIs) should contribute to 'nation building' via astronomical tax.

[volkman10]

We are selling everything we produce, no need of GST cut now: RC Bhargava


Maruti Suzuki sold nearly 10,000 cars every day during the ten days of Navratri and Dussera festivities.

The auto industry has done pretty well in the second quarter and I don’t think that anybody has said that they have suffered due to lack of demand. In fact production capacity, more than anything else, is still being built up due to various constraints. Therefore if I was in the government at this point when there is no lack of demand for what can be produced, giving relief at this stage will be quite unnecessary

The present situation is that we did okay business in Q2 and Q3, the market situation looks quite adequate and we will not have a situation where we will have surplus stock available with us. At this point, any GST impact in the third quarter does not arise. The question is what steps will the government take when demand starts falling off some time next year. I have no reason to say it will but the government would like to take a view of what they can do or would like to do at that time

Link