R.C. Bhargava: Indian market needs small car segment to grow 6-7%
RC Bhargava believes small cars are vital for future growth in sedans and SUVs. Neglecting them hampers significant expansion.
R.C. Bhargava, Chairman of India's leading automaker, Maruti Suzuki, has emphasized the importance of "small car growth" for the sustained development of the country's automotive industry. Speaking to the media following the Q2 FY-24 earnings report, Bhargava stressed that the future growth of the sedan and SUV segments in India hinges on the prosperity of small cars. He went on to assert that substantial growth is unattainable without nurturing the small car market.
In the first half of the current fiscal year, the entry-level car segment, often referred to as the mini car market, witnessed a decline to approximately 100,000 units, marking a substantial drop of 37 percent. Furthermore, the compact car market also experienced a slight decrease, despite the overall market showing more than 7 percent growth.
Bhargava, at the helm of the largest car manufacturer in India, anticipates that next year's growth will remain stagnant, with the small car market only expected to rebound after a two-year period.
While the Indian car market has achieved remarkable milestones, it appears poised for a speed bump and might record flat growth in the coming year. Nonetheless, Maruti Suzuki is committed to expanding its market share and aims to capture 50 percent of the market.
Bhargava attributed the decline in the entry car segment to the impact of various regulations, which have led to increased costs. Consequently, potential buyers have been compelled to postpone their purchasing decisions.
Bhargava stated, "I am assuming that the buyers in that segment will be able to absorb the price increases seen in the last few years and will come back. The small car market has to grow for the long-term sustainability of the market; otherwise, it will be challenging for the Indian market to achieve even 6-7 percent growth."
He underscored the pivotal role of the automotive sector in supporting India's economic growth, emphasizing that "the growth of the car market is a prerequisite for the Indian economy to continue expanding at 6-7 percent." However, Bhargava acknowledged that the Indian passenger vehicle market has faced distortions due to the disproportionate impact of regulatory changes on small cars compared to larger ones. As a result, small car buyers have had to defer their purchases due to the higher prices of these models at present.
"We are only speculating how much time it will take for small car buyers to overcome this affordability hurdle, and it could take another 2-3 years before the small car segment experiences a revival," Bhargava concluded. The path to rejuvenating the small car market remains uncertain, but Bhargava's insights shed light on the importance of this segment for the broader health of India's auto industry.