'2 to 3 years before small car market revives'

'It will take some more time because the affordability of these cars have changed drastically.'

The Indian passenger vehicle industry expects zero growth in its volume sales in the next financial year, primarily due to the ongoing decline in sales within the small car segment, says R C Bhargava, chairman, Maruti Suzuki India (MSIL).

"I am not certain that I agree with the industry forecast that there will be zero growth in the car market in FY25. It is a figure that I have seen and heard. I am not saying I am in full agreement with this figure," Bhargava told reporters at a virtual press conference.

In the first half of FY24, sales in the passenger car segment, which comprises small and compact cars, witnessed a year-on-year (Y-o-Y) decline of 7.9 per cent.

Meanwhile, sales of utility vehicles during the same period saw an increase of 20.7 per cent Y-o-Y.

PV makers' overall sales jumped 6.8 per cent in the first half of FY24. MSIL anticipates a growth of approximately 5.5 per cent in the PV industry's sales for the entire FY24.

"I believe that growth in the small car segment is an essential requirement for a sustained growth of the car industry. Future customers for sport utility vehicles (SUVs) or sedans will largely come from people who have gone up from entry-level cars. We will not get large numbers of new entrants into a segment (SUVs) that is priced between Rs 15 lakh and Rs 20 lakh," Bhargava noted.

When asked if the improvement of sales in the small car segment can be expected from the next year onwards, Bhargava replied, "I don't think that the improvement in the small car market is going to happen that quickly. I think it will take some more time because the affordability of these cars have changed drastically because of the (regulatory) changes that have happened."

Over the recent years, the government has implemented a series of carbon emission reduction regulations on PV manufacturers.

This has compelled companies to modify their vehicle models, resulting in an overall increase in production costs.

"I believe it will take 2 to 3 years before the small car market has to revive. Something has to happen in that segment because if the small car market does not revive and it remains what it is today, I don't think long term sustained growth of even 6 to 7 per cent will be possible," he mentioned.

Bhargava stated that MSIL is not as "pessimistic" as the rest of the PV industry and it believes that there will be positive growth in the next year.

"It can only happen if per capita incomes go up and the cost of the car does not go up," Bhargava said. "This means that the impact of new regulatory steps should not again push up the cost."

The growth of GDP should push up the purchasing power of bulk of the people who are car buyers.

That will take care of the erosion of purchasing power that has happened in the last 3 to 4 years, he noted.

He also does not see the government cutting taxes on small cars. "The only other way is for the incomes to go up faster than the cost of the car goes up."

Feature Presentation: Rajesh Alva/Rediff.com