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Over-regulation by govt killing auto industry, says Rajiv Bajaj; Budget must address 'real issues'

Sumant Banerji     January 14, 2020

Never the one to mince words, Bajaj Auto managing director Rajiv Bajaj on Tuesday hit out at the government for over regulation that he said was killing the industry. The automobile industry in 2019 endured its worst-ever performance in a year in over two decades with a near 14 percent decline in sales over 2018.

Bajaj said the increase in price of a two wheeler by almost 30 percent in the last 18 months was a big reason for the current slowdown and added that he did not expect the upcoming budget will be able to solve the problems.

"If the real issues are addressed, only then can we see some chance. Addressing peripheral issues has never solved any problem," Bajaj said after the launch of the company's first ever electric vehicle, Chetak. "The single most important reason for the current slide is over-regulation by the government. We are budget agnostic. The over-regulation is killing the industry."

A host of regulatory changes in the domestic automobile industry starting with new safety norms which has made features like ABS for two wheelers mandatory has led to an increase in the price of vehicles. Also, the change in insurance norms that made third-party cover mandatory for two wheelers for five years has further raised prices. Added to that the changeover from BS IV to BS VI norms in April 2020 and the rising clamor for introducing electric vehicles even when the infrastructure is not ready to support mass adoption has only added to the confusion.

"The price of owning a two-wheeler for a common man has increased by 30 percent in 1.5 years. That is a hard problem. Does the government have the humility to reflect and roll back some of this? Can they absorb some of the hit by BSVI?" Bajaj said. "It will be politically incorrect to say that BSVI is not the right thing to do, but frankly, I'm going to say it. Getting rid of old vehicles in a suitable mechanism would have been more effective than squeezing out the last little bit of emission from BSIV vehicles."

Sale of two wheelers, which forms the biggest chunk of domestic automobile sales slumped 14 percent in calendar year 2019 at 18.57 million units against 21.64 million in 2018. In the fiscal so far (April-December 2019), sales are down nearly 16 percent at 13.91 million. Bajaj Auto's own sales also declined 13.25 percent at 1.7 million units. Bajaj is country's fourth largest two wheeler manufacturer behind Hero MotoCorp, Honda and TVS.

The industry has been asking for a reduction in GST on automobiles from 28 to 18 percent and while Bajaj agreed it would help absorb some of the cost that manufacturers are forced to pass on to the consumers, he remained doubtful if it would really happen.

"I don't think there is anything that the budget can do which can solve the industry's problems. The budget was not the reason due to which the sales have been heading down," he said.

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