No need for any tax cut now: Bhargava
Maruti Suzuki on Thursday reported second-quarter profit inched up 1% ₹1,371.6 crore, helped by a near 10% increase in sales. Pointing to the improvement in sales, Chairman R.C. Bhargava asserted there was no immediate need for a reduction in tax rates for the auto sector. He also said he expected steady demand for vehicles at least till December.
However, he cautioned that any drop in urban income levels on account of the economic slowdown could impact demand.
“Compared with the second quarter of last year, Maruti has performed better because last year was the time when Maruti went down 16%, the industry went down 18% [in volumes]. If you take that as the base, then doing better than that is something which is quite unsurprising,” Mr. Bhargava said.
The country’s largest carmaker reported net sales increased 9.7% year-on-year in the July-September quarter to ₹17,689.3 crore. The company sold a total of 3,93,130 vehicles during the quarter, up 16.2% compared to the same period previous year.
To a query on a reduction in the Goods and Services Tax, he said that currently there wasn’t any lack of demand for cars and giving relief at this stage would be quite unnecessary. “Today, I’m selling everything I can produce. If the GST went down and demand increased by another 30%, I wouldn’t have cars to sell,” he said.
Mr. Bhargava added that the auto industry had done pretty well in the second quarter and no one had suffered because of lack of demand.
He, however, stressed, “In case demand actually falls off and it looks like that it’s not a temporary event but a sustained kind of falling off…that is when the government will need to consider what they need to do.”
He also said he didn’t see any demand slump till at least December.
“After that, the situation is hard to predict because the impact of the festival will be over. To a large extent, the impact of people wanting personal vehicles will be over. We don’t know what the urban income level will be and how much purchasing power will be left with the people in urban areas because the economic downturn is there. I don’t see that there can be any strong kind of urban demand coming. And not because people don’t want the car, but because they can’t afford the cars.”
He, however, added that given that monsoons and previous crops had been good, rural areas —which even today were contributing significantly to the growth of sales — sales would continue to grow substantially.
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