India's automobile industry which is reeling under massive sales downturn has compelled many foreign companies to close their businesses in India, said chairman of Maruti Suzuki RC Bhargava. He said that many auto companies in India are making losses at present due to which many foreign companies, including General Motors and Ford, that had invested in India are closing up.
Speaking about the crisis in the auto sector, Bhargava said one of the key reasons for this was the government's decision that all standards of cars in India should now match emission standards followed in European countries. However, the ability of Indians to pay is not the same as Europeans. He also said that no one talked about difference in the cost of production (of cars of the two standards) before making changes in the regulations.
He made this comment while responding to an argument made by Niti Aayog vice-president Rajiv Kumar on the auto sector crisis while participating in the India Today Conclave 2019 in Mumbai on Saturday.
Currently, the entire auto sector is reeling under a prolonged slump, affecting vehicle sales across all segments. While the domestic slowdown was the key drag on their financials, auto companies also bore the brunt of the slowdown in the global markets. The automakers are laying off staff and temporarily halting production to align their inventory of goods and to keep costs in check.
Rajiv Kumar, who was sharing his manual on how the government will fix India's economy, said that auto companies should also take the responsibility for the fragile state of the auto sector. He suggested that auto companies should consider lowering price of their products to boost growth and increase the demand.
"At this stage for having a debate on who is making how much profit, requires one to take a look at the balance sheets of car companies in India. Most of the car companies are making losses. GM4 and Ford folded up because they were losing money. Most of the foreign companies who made investment in India are losing money. Tata Motors is losing money," Bhargava said while responding to Rajiv Kumar suggestions.
"We (Maruti Suzuki) have accumulated money because from the beginning we have been a very frugal company. We have paid low salaries to our top management, we have not spent money on various other kind of things...we have build up our reserves," he said.
Explaining about the company's exports, Bhargava said, "As far as our (Maruti Suzuki) exports are concerned, we are exporting about 120 thousand cars a year. Our foreign exchange earnings from exports have always exceeded what we pay out in royalties. With the kind of technology we have, we have been exporting (cars) even to Japan. There is hardly any product manufactured out of India which goes to Japan."
Edited by Chitranjan Kumar