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Over regulation is killing the auto industry: Rajiv Bajaj

Two-wheeler sales have been hit the most due to the slowdown, recording a dip of 14.19 percent to 18.56 million units in 2019 as compared to 21.64 million units in 2018, as per SIAM data.

January 14, 2020 / 05:53 PM IST
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The government must look at cutting Goods and Services Tax (GST) rates for a limited period to offset the multifold increase in prices that has put brakes on demand growth since several months, according to Rajiv Bajaj, Managing Director, Bajaj Auto.

Speaking to the media on sidelines of launching the electric Chetak Bajaj, he stated that the upcoming Union Budget won’t fix the issues plaguing the industry unless issues of over regulation is tended to.

"I don't think there is anything that the budget can do that will immediately solve the problem that the industry is facing which is slowdown and lack of growth. In my view, the Budget was never a problem in the first place. Business sentiment has been done for the past one-and-a-half years," said Bajaj.

Two-wheeler sales have been hit the most due to the slowdown, recording a dip of 14.19 percent to 18.56 million units in 2019 as compared to 21.64 million units in 2018, as per data supplied by the Society of Indian Automobile Manufacturers (SIAM).

"There are multiple reasons for it but in my view the single most important reason or something that is responsible for the state of affairs is over regulation. It is over regulation that is killing the industry. All this started in September 2018 in terms of insurance cost where several thousand rupees of increase was imposed on the customer followed by change in safety norms where ABS and CBS that was imposed and now BSVI," added Bajaj.The six-fold hike in insurance premium for third party covers hit the two wheeler segment dearly when premium costs jumped 356 percent to Rs 3285 from Rs 720 for budget motorcycles powered by a 100cc engines. Bikes above 150cc but below 350cc have seen premiums jump to Rs 5453. Above 350cc the same has jumped to Rs 13034.

Likewise the mandatory upgradation to new braking system norms – antilock braking system and combined braking system – pushed up the costs further in April 2019.


"So, within a period of less than a year a typical 150cc motorcycle that costs about Rs 70,000, paying another Rs 15,000 is huge. A manufacturer struggles to improve productivity and reduce cost to keep his price increase as close to zero as possible but inevitably he has to pass on 3-4 percent every year. But instead of that it is 20 or 30 percent increase," added Bajaj.

The implementation of Bharat Stage VI emission norms from April 1 would shoot up the prices further. Some of Bajaj’s rivals like Hero, Yamaha, Honda and Suzuki have rolled out BSVI compliant vehicles with a price hike of Rs 7,000. Bajaj will start rolling off BSVI vehicles in the next few days.

"It would be politically incorrect to say that BSVi is not the right route but in my view getting rid of old vehicles would have been much more effective than squeezing the last bit of emission from BSIV vehicle. But instead of that we are going to implement BSVI and impose another Rs 8,000-10,000 Increase. Some of the BS VI two wheelers launched are priced Rs 7,000-18,000.

"In a one- and- a- half year, prices of two-wheelers will have gone up by 30 percent. To me this is the hard and tangible issue. Nobody's wallet will grow by 30 percent in 18 months. Now does the government have the humility to reflect and roll back some of this (hike)? Can they be pragmatic and just like on EVs where they have brought down the GST to 5 percent from 12 percent they bring down the GST on internal combustion engine vehicle to 18 percent from 28 percent for a period of time till growth returns?" added Bajaj.

Moneycontrol News
first published: Jan 14, 2020 05:50 pm

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