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Rajiv Bajaj says no sign of green shoots in demand yet, govt tightening screws around ICE vehicles

Updated : August 02, 2019 12:21 PM IST

‘If it moves, tax it. If it keeps moving, tax it more and if it stops moving, tax it to the maximum’ is the model the government seems to be following for the Indian economy, said Bajaj Auto MD Rajiv Bajaj, invoking the famous quote by former US President Ronald Reagan.

Reagan had said, "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."

The auto companies have been facing a slowdown in demand in the last few quarters due to a rise in registration and insurance costs. Bajaj Auto's total vehicle sales declined 5 percent to 381,530 units in July. Exports rose 8 percent to 176,060 vehicles in July from 162,832 units a year ago.

Bajaj said a hike in the insurance cost of about Rs 5,000 in September 2018 proved to be almost the tipping point for an industry that was doing well and suddenly found itself slowing down. "Beyond Rs 1,000-5,000 detail, the fact is that every increase at this stage is only going to hurt,” he said.

"We will still be relatively better placed than industry but that is not much of a consolidation. Overall, we are almost the same as last year because exports have done relatively well and I don’t expect August to be any different which means that there will continue to be degrowth in domestic motorcycles but hopefully domestic three-wheelers and export should shore that up a little bit,” said Bajaj.

Speaking about likely green shoots in terms of demand, he added, “The short answer is no, I don’t see any green shoots yet. I don’t have the July numbers yet but obviously year-on-year (YoY) the July numbers will be down. I suspect the biggest fall will be in the domestic motorcycles for us.”

According to him, there is also a bigger takeout here from the government side, which is that the government seems to be very clearly sending out a message to the industry that they are going to make it more and more difficult for the industry as far as internal combustion engine (ICE) vehicles are concerned. At the same time, they are going to continue to solidly support EVs.

“If the government is pushing us in the direction, without banning us, where they are gently or a little more than gently nudging us away from ICE vehicles towards EVs, I am okay with it,” Bajaj said. NITI Aayog is focused on a Pan-India kind of ban, he said.

“Their focus has now shifted more to just urban pollution which probably will be the top 10-20 cities that too in a phased manner, which means that these constitute 20 percent of industry size and if that 20 percent will move to EVs over the next five-ten years, that will be more than compensated by growth in the semi-urban, rural and export markets. We would assume that some degree of growth would return,” he further added.

On state governments increasing the road taxes, he said, “If it is true then it is a very significant increase and it will have a very significant negative impact.”
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