Maruti chairman says entry level car market has shrunk 28% in three years as airbag costs loom ahead

"In the last three years, the entry-level car market share has shrunk by 28 per cent," Maruti Suzuki Chairman RC Bhargava said.

Maruti Suzuki India on May 19 said its new facility in Haryana, the auto maker's third in the state, would reach a peak capacity of 10 lakh units per annum in the next eight years, entailing a total investment of Rs 18,000 crore.

Chairman RC Bhargava spoke to CNBC-TV18 about the challenges faced by the firm. "In the last three years, the entry-level car market share has shrunk by 28 per cent," he said adding that inflation is worrisome for the segment.

On the challenge of hiring 75 per cent of employees on a domicile basis in Haryana, Bhargava said, "The quota is for a certain bracket on the total cost to the company, and we don't see any problem in that. Our employees are well-paid, and they are paid above the TCTC bracket for the 75 per cent quota."

Auto bookings have been "satisfactory". With the support of the state, the first plant with an annual capacity of 2.5 lakh vehicles is expected to be commissioned within 2025, he added.

The land parcel can sprout up to four plants, according to the chairman.

"We have around 300,000 customers on our waiting list. The industry must be having around 600,000 total waiting customers. So, with these kind of numbers, nobody bothers about market demand or bookings, because we have more than enough orders," Bhargava said.

The government of India is all set to mandate the use of six airbags in all new cars from October to increase passenger and road safety in the country.

Speaking on this, Bhargava cited the example of Hyundai shutting down the production of its entry-level hatchback Santro due to the extra cost of manufacturing. The additional cost of airbags is going to make entry-level cars uncompetitive.

"I think we're ignoring the fact that the Bharat market is already shrinking. Any extra burden will hit the Bharat market, and a lot of burden is from inflation," Bhargava said.

All policymakers need to look at what is happening and recognise that there is a Bharat market and there is an India market," he added.

However, Maruti confirmed that they're not planning to end production of any of their entry-level car markets.