Why R C Bhargava is not completely right on his views on slump in auto-sales?
Why R C Bhargava is not completely right on his views on slump in auto-sales?
Tejinder Singh Bedi
@tsinghbedi
A TOI Business report of the day has put ‘the mandate to introduce safety measures such as air bags and ABS on new cars making the passenger cars costlier and out of reach of the two wheeler riders’ as one of the reasons besides ‘a paralysis of decision making in the banking sector’ in the words of Maruti chairman R C Bhargava. The auto sector is currently in the grip of a severe slow down to a 41 % crash in sales of passenger cars ( down tor 10th month in a row and just ahead of the festive season around the corner) and another 47 % in the same of vans and to the lowest level in two decades.
The other major factors attributed for adding to the burden of car buyers by Bhargava are the taxes on petrol and diesel and an upward revision in road and registration charges by state governments. Though all these factors put together have definitely added to the higher landed cost of new vehicles, the huge drop in the sales of the passenger cars and other automotives, the highest ever in two decades can not solely be attributed only to these.
Bhargava however seems quite right in mentioning that the all round cry for reduction in the GST on auto vehicles from 28 % to 18 % is not going in any way to spruce up the declining sales.
The logic of a structural shift for shared mobility through Ola or Uber too holds no significant ground; as, if not the same as the numbers lost in open sale of personal passenger vehicles due to induction of these services, quite close to these still have to be picked for Ola and Uber services themselves, majorly run on CNG; making this growing substituted lot also a lot cheaper to run besides generating the much required regular employment of drivers, need to contributing to lesser emissions through increasing number of CNG run vehicles — until electric vehicles start supplementing demands in a bigger way and for encouraging entrepreneurship drive among the lesser qualified as solo owners of such service cabs to begin with as their fresh start-ups.
And along with this, there is also a logical need to rationally look at the savings one can expect by travelling by public transport including services such as Metro/Rapid Metro, for which the parking charges of personal cars by the office or business going community forced to be left in commercial parking zones for as long as 10 to 15 hours a day add to very high additional costs for the same that can still tilt balance for opting for a point to point usage of personal vehicles only with the independence these ensure for anytime mobility. However, large auto giants like Maruti that are already running Traffic Management Training Schools can also take up campaigns for encouraging shared use of personal vehicles by at least four passengers in one car including the driver.
For a nation that accounts for the highest numbers of deaths in road including two-wheeler and car accidents there can hardly be any other view on introduction of the safety provisions mentioned. The report states that the cumulative effect of all the factors mentioned has contributed to an increased burden of Rs 55000 for an entry car which includes around Rs 20,000 through higher road tax in certain states.
With the current government at the center having successfully contained the inflation rate for quite sometime now, as claimed time and again, the overall increase of Rs 55000 boils down to just Rs 3000 per month or Rs 35000 only excluding Rs 20,000 additional payable in certain states over a period of fifteen years from the first buy. Index this against an average of 5 to 7 percent increase in the CTC of car affording working population year on year or of an average of 5.5 % in our overall GDP with inflation rates under control this might hardly be as great a burden as anticipated to snub desire to buy a car even for the first timers. An in-depth study on continuous increases in the CTC of car aspiring working population and the middle managers over the last decade or two including the way the slide was turned around in the last major economic recession might throw some different pointers infact.
The only plausible constraint for the moment thus seems to be the quoted — increasing reluctance of the banking sector to finance new vehicles. It is only here where the government may be left with some cushion to facilitate a higher demand for entry level and new vehicles as also for the old cars — between 3 to 5 years of run to be encouraged for the next first move over to a higher level of vehicle — . a prevalent practice too. And this while the government has already infused Rs 2.5 lakh crores into the PSU banks to improve their health in the last five fiscals gone besides the recent mergers expected to render these financially further stronger.