Entry-level PV market indispensable for sustained growth in India: Maruti’s RC Bhargava

R.C. Bhargava - Maruti Suzuki Chairman

Despite garnering higher margins from the sharp growth in the sales of its Sports Utility Vehicles (SUVs), Maruti Suzuki India Ltd (MSIL), while not complaining, still has its wagon hitched to the small-car star. So much so that the company is looking for a revival in the entry-level segment for “sustained growth” in the passenger vehicle of PV market.

In a post-earnings conference, MSIL Chairman RC Bhargava said that future customers of SUVs or sedans will largely come from people, who will move up from entry-level cars, adding that he does not see a large number of new buyers flocking to the “Rs 15-20 lakh segment”.

“In the long term, for the health of the passenger vehicle industry, revival of the small-car segment is essential. It will happen in a couple of years,” Bhargava said.

Society of Indian Automobile Manufacturers (SIAM) had recently revealed that the sales of entry-level cars continued to slide due to the constant stress in the rural economy. Sales of vehicles that fall in this segment have been falling steadily and have hit record lows as would-be buyers have gravitated towards more aspirational SUVs.

Bhargava acknowledged that the market for cars priced at the lower end of the spectrum has not improved at all and has “gone down significantly” over the last few quarters. However, he averred that there is a customer base of 150-180 million two-wheeler owners who are looking to migrate to small cars but are unable to do it due to “stagnant income levels” and “rising unaffordability” of those models.

The entry-level car segment, comprising the Alto K10 and Kwid, among others, saw its wholesales decline to 35,000 units in Q2 FY 2023-24 compared to the peak of 1.38 lakh cars in July-September 2018-19, as per SIAM data released recently.

“Given the kind of demographics and consumers we have in India, including 150-180 million two-wheeler owners, the demand for entry-level level cars has to come back. I believe if the prices of cars stop increasing rapidly like they have in the past (because of regulatory norms, etc.,), and the income levels grow, this segment will also see an uptick,” Bhargava added.

The MSIL chairman also stated that he anticipates the “affordability factor”, which is the key reason in the past for small car sales going down, is going to “gradually erode”. He also said that as there is sustained growth of 6-7 percent in the economy, prospective customers will increasingly be able to afford small cars in the next couple of years.

“Without growth at the entry-level and small-car segment in a market like India, sustained (and) very decent high levels of growth in the PV industry are very unlikely. The growth projections for next year are virtually at stagnation levels and that is partly a result of the fact that there has been de-growth in the small car segment and India needs that segment to grow,” Bhargava added.

On Friday, MSIL reported a growth of 80.3 percent in its standalone Profit after tax (PAT) at Rs 3,716.5 crore during the July to September 2023 period. Its revenue from operations during Q2 FY24 went up 23.8 percent to Rs 37,602 crore as against Rs 29,930.8 crore in Q2 FY23.