A Maruti Suzuki India Ltd. Ignis urban compact vehicle is displayed at the company’s pavilion during the Auto Expo in Noida, Uttar Pradesh, India. (Photographer: Anindito Mukherjee/Bloomberg)

Cess On New Petrol, Diesel Cars To Hit Small Car Sales, Says Maruti’s Bhargava

India’s largest carmaker is worried about the government’s reported push for electric vehicles by imposing levies on new petrol and diesel-powered vehicles.

“It will certainly have an impact on sales of small cars,” RC Bhargava, chairman of Maruti Suzuki Ltd., told BloombergQuint in Delhi today. “The levy of Rs 12,000… is a substantial increase for cars which cost Rs 2.5-3 lakh.”

Bhargava questioned whether the move will benefit all people. “While the lower middle-class will be impacted by the costs, the subsidies will go to people who buy electric cars, which most likely at this stage will be (by) well-to do people.”

The Times of India newspaper reported citing top officials that the government has drafted a plan—under the “polluter pays” principle—to impose a fee of Rs 12,000 on the purchase of new petrol and diesel cars to raise money for incentivising electric vehicles and battery manufacturing, under a new policy that is nearing finalisation. This cess will be used to subsidise electric two-wheelers, three-wheelers and cars.

Also read: Modi Says India’s Electric Vehicle Policy Will Focus On Public Transport

The automobile industry awaits clarity on India’s electric vehicle ambitions as Asia’s third-largest economy looks to cut dependence on fossil fuels to lower import bill and emissions. It targets 30 percent electric mobility by 2030.

“The levy of Rs 12,000 will be far more from than what can be given as subsidies or amount which has been mentioned in the news report,” Bhargava said. “It really means that the number of electric vehicles should be around one fourth of the total sales of cars.”

Bhargava also questioned the logic behind the polluter pays principle. “If the principle is polluter pays then why would two-wheelers which run on petrol not be subject to a cess?”

Also read: Q2 Results: Maruti Suzuki’s Profit Declines For The First Time In Four Years

He said that if the cess is used to set up infrastructure for compressed natural gas instead of electrification, larger results will be delivered. This, he said, was because the infrastructure for plying electric-vehicles isn’t there. “CNG vehicles are more acceptable. There has been a growth of 50 percent of CNG vehicles in India this year.”

Yet, Maruti Suzuki—with a market share of over 50 percent—is betting on electric vehicles. “We have a Wagon R which Suzuki had electrified and that is under testing phase at the moment. It will be launched in 2020,” Bhargava said. “We don't see the launch of even one electric car next year.”

On Car Launches

  • Maruti Suzuki will launch one model by the fourth quarter of this fiscal.
  • Will launch two models in next financial year.

On Supreme Court Verdict On BS-VI Emission Norms

  • All vehicles Maruti will be Bharat Stage-VI (BS-VI) compliant by December 2019.
  • BS-IV vehicles will be sold and registered before March 31, Bhargava said.

Also read: India’s Sputtering Electric Vehicle Ambition Needs Direction