Six-airbag rule will lead to price hikes: Maruti Suzuki Chairman RC Bhargava

RC Bhargava, Chairman, Maruti Suzuki India Limited.

Contrary to its earlier claim, Maruti Suzuki India Ltd (MSIL) now says the government’s rule that passenger vehicles should have six airbags will have no major impact on costs and it will not lead to a fall in demand for entry-level cars. In fact, the company says it is well geared up for that regulation and its "competitive position" would not get impacted.

This was stated by MSIL chairman RC Bhargava, who affirmed that even its small cars, such as the Alto, are being re-engineered to accommodate six airbags.

Talking to reporters in a post Q4 earnings virtual conference, Bhargava said: “Regulations have to be for the better. The requirements for making vehicle safety better than what they were and giving passengers safer vehicles is obviously a good thing to happen. How can one find I have a different view on that?” He went on to add: “When regulations say something has to be done, we do it. Everybody (carmakers) does it. But you can’t put in airbags without a price hike.”

It may be recalled that last year, Union Road Transport and Highways Minister Nitin Gadkari had stated that the mandatory six airbags rule for passenger cars will come into force in October 2023. The ministry had earlier planned to make six airbags mandatory from October 1, 2022.

Sales will not be hit

When queried if the new safety regulation will impact Maruti Suzuki’s sales, Bhargava said: “It doesn’t affect our competitive position because everybody has to go for a price raise. Hence, everybody’s costs (increase) will be similar. Whatever the date (for implementation) is for six airbags, the price will go up from that date."

When asked if the airbags can be fitted in small cars, Bhargava’s answer was in the affirmative. He was also categorical that there will not be any delay in production.

Bhargava’s comments come at a time when Maruti Suzuki expects small car sales to remain negative this year as people continue to find them unaffordable.

As per Society of Indian Automobile Manufacturers (SIAM) data, the domestic sales of utility vehicles went up by 34.54 percent to about 20,03,718 units in FY23.

On the other hand, domestic sales of entry-level cars increased by less than 10 percent in the previous financial year at 252,000 units, as per SIAM.

Maruti sold 232,911 units of entry-level cars (Alto and S-Presso) in FY23, recording a growth of just 10 percent.

“Demand for small cars is pretty stagnant. In 2023-24, we don't really see a significant growth in this segment at all. It will remain flat,” Bhargava noted. He said that the “affordability factor” is a key reason for sagging sales in the small-car segment.  “The country has to become a little bit wealthier for people to be able to afford these (small) cars.”

Demand rising in SUV segment 

Bhargava also acknowledged that consumers are increasingly gravitating towards the Sport-Utility vehicle (SUV) segment, which contributes more than 40 percent to the total domestic PV market.  “We have launched a number of vehicles in this segment. Since this is the way the (PV) market is going, we will go the same way.”

Bhargava said if the economy grows faster, the slowdown in the small-car segment will reverse.  “If the economy grows faster, people will, in any case, not want to buy small cars (and) will move up their capacity to buy bigger cars, which is what has happened in most parts of the world.  It is not something which should cause me sleepless nights or anything like that,” he said.

Meanwhile, MSIL is anticipating a higher growth rate than the 6-7 percent rate that the entire market is looking to register during FY2023-24.  The confidence stems from the new launches lined up during the current fiscal.  Currently, Maruti has an order backlog of 412,000 units and it is looking to reduce the waitlists of certain models like the Ertiga, Jimny, etc., by ramping up the output.

MSIL has also reconfirmed that it will be rolling out six electric vehicles (EVs) in India by 2030, and most of them will be in the SUV category.