The income tax relief announced in the last Union Budget is unlikely to revive the demand for small cars, a segment which is critical for the overall growth of the Indian automotive industry, Maruti Suzuki India Ltd Chairman said on Friday.
Speaking at the post-earnings media briefing of MSIL’s January-March quarter (Q4FY25) results, Bhargava said that the government needs to take steps to revive this segment.
India’s largest carmaker posted a drop in Q4 profit which surprised Dalal Street, as analysts were expecting flat profits. This 4.3 per cent drop came on the back of higher expenses and deepening discounts, especially in the small car segment. While sales of SUVs are booming in India, those of below Rs 10 lakh have been slow, showing that disposable income still remains an issue for the aspiring classes.
He said that only 12 per cent of households in India are above the annual income bracket of Rs 12 lakh (upto which tax relief has been provided) and the rest are below that level where they cannot afford cars costing Rs 10 lakh and above.
The industry veteran stated that with the cost of owning an entry level car going up by as much as Rs 90,000 per unit, people are unable to afford them and thus the domestic market, which remains grossly under-penetrated, has been witnessing muted growth.
“For the car sales to revive, small cars have to become more affordable. The government has recognised, to a large extent, the fact that without the revival of the small car market, car market growth in India will always remain muted,” he said.
Shares of the company fell nearly 2 per cent on Friday, on back of the disappointing numbers. The consolidated net profit declined to Rs 3,911 crore. Total revenue increased to Rs 40,920 crore in Q4 as compared with Rs 38,471 crore in the year-ago period. The company said its total expenses during the fourth quarter rose to Rs 37,585 crore, an increase of 8.5 per cent year-on-year.
