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Cover Story

Auto boom: Past, Present & Future
The first Maruti 800 was rolled out on 14th December, 1983. Maruti Suzuki Chairman R. C. Bhargava talks about the impatient inception years, license Raj, 800 phenomena and his vision for the future of Indian auto
Issue Date - 16/02/2012
A major event that heralded the arrival of the winds of change over the Indian economy in the early 1980s was the establishment of Maruti Suzuki – then a joint venture between the Indian government and Suzuki of Japan. Over the last three decades, the company became a veritable backbone for India’s automobile revolution by first seducing thousands of Indians to swap their stodgy two-wheelers for spanking new 800s, and changing gears in the new millennium to wow an entire generation with slick sedans and SUVs. B&E catches up with R. C. Bhargava , the man who has been with Maruti Suzuki since the beginning, and the one who has seen it all. Having steered the company from being a public sector entity to a Japanese one in between, he now stands tall as the Chairman and public face of the auto behemoth. Here he talks about how 1982 transformed India’s auto industry. Excerpts:

How would you judge the impact of Maruti joining hands with Suzuki (in 1981) on India’s automobile industry?
We started our journey in an environment when the Indian economy was closed and it was largely run in a very controlled license driven production process. Since the country had forex problems at that point, both the export of technology and export of components was licensed. The scenario remained like this till 1991, after which control were gradually withdrawn. The automobile industry became free of licenses in 1993. Ever since that happened, there has been an influx of many global players towards the Indian automobile industry and as a result, today we have almost every big name in the global automobile circuit competing for the Indian market. In fact, once the regulations moved out of the picture, the industry has witnessed a robust growth over all these years.

So you are saying that the end of License Raj resulted in favour of the Indian automobile industry?
The delicensing has worked in favour of the consumer. The policies that are made should always be made with a view to benefit the ultimate consumer. It has been seen in the past that if a policy is trying to lend a helping hand to any industry, but the policy is not working in the favour of the consumer, the results haven’t been as desired at the time of framing the policies. The person who should benefit from government policies should always be the end user rather than the players in the industry and it has been the case with the automobile industry so far. The consumer today has more choices, better cars and due to the high competition, owning a car has only become more affordable during all these years.

Maruti started the small car revolution with the 800 in India and the country remains a small car market even today. Do you see a shift happening where the Indian consumer will as a mass graduate towards bigger cars – a trend that has been seen in most major global markets?
I believe India will continue to be a small car market. It will be a situation where the small cars will dominate but there will be a big enough market for bigger segments as well. There is still a very high potential for small cars to grow in the Indian market. However, as the disposable income continues to go up, the consumer is willing to enter the bigger segments as well. There is still scope for more fragmentation in the Indian market and as the competition will increase in the future, there will be new segments coming up for the Indian consumer. For instance, when competition came in post the 1991 economic reforms, 800 was the only small car available to the Indian consumer. Today, there are different segments within the small car segment itself and each of those segments is growing.

Considering the low penetration of cars (15 per thousand) that we have in the domestic market, there is still a lot of headroom for growth as compared to markets like China and US. However, the automobile industry has some tough times of late in terms of sales growth. Going forward, what are the major challenges you see for the industry?
The biggest challenge for the automobile industry is that the growth for this industry is correlated with the growth of the economy. In other words, economic growth is very crucial for the growth of the automobile industry. The second challenge is about laying a steady set of long-term policies for the sector as it will give all the stakeholders a clear picture with respect to what they can expect in times to come. The third challenge that this sector currently faces is about fuel availability and pricing. It seems that the industry is moving close to a situation where petroleum products will not be easily available at an affordable price. In fact, the industry has found ways of providing cars to the consumers, which are affordable in terms of running cost, despite the high fuel price.

But fuel prices are on a constant rise and India is still not ready for hybrid and electric cars. What is the possible solution to this problem?
It should be noted that hybrid cars do not need a huge infrastructure to back them; it is the electric cars that require such an infrastructure. There is no technology available so far that may result in developing a hybrid car at an affordable price. And till the point there is no technology available in the market, it is tough for automakers to come up with hybrids that have the potential to attract enough volumes. In addition, one still doesn’t know the demand – that is underlying demand - for hybrid cars since it is directly related to the eventual pricing of the product. However, there is no doubt that if launched at an affordable price tag, there will be a demand for hybrid cars in the Indian market.

Do you believe that the kind of infrastructure we currently have in the country is ready to back the kind of growth that the automobile industry foresees in times to come?
There are lot of investments are going in this area with all state governments and the central government trying their best to improve the infrastructure in the country. In fact, the government is very much aware about the situation and I expect that the slew of private public partnerships that are likely to happen in the sector over the next few years will work heavily in improving the infrastructure across the urban and rural centres in India. Personally, I don’t think that there is that big a need therefore to worry about the infrastructure part, as the industry is gearing up to make radical changes to the situation.
Pawan Chabra           

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