As car demand slows in India, dealer stock levels across the entire industry have surged to alarming heights. The situation is so critical that the Federation of Automobile Dealers Associations (FADA) has written two letters to the Society of Indian Automobile Manufacturers (SIAM) in the past few months to resolve this matter.

According to FADA, its members are holding around 730,000 units – enough to cover over two months of sales. SIAM, on the other hand, says that the stock with dealers is about 400,000 units.

Bhargava said, “We do expect the demand to revive. I think the nation has a need for small cars and we are waiting. Maybe by the end of 2025-26, we should have this segment coming back…We firmly believe that low cost and small cars are necessary in our economic and social conditions. A temporary setback in demand is not going to change our strategy.”

According to FADA, about 920,047 cars were sold in India in the first quarter of 2024-25, recording a growth of just 2.53 per cent year-on-year.

Bhargava mentioned that there has been a “small delay” in finalising the site for the new facility that will produce 1 million units per year.

“Our programs are expanding, production is proceeding as scheduled. Cars produced in the Kharkhoda plant will add to our sales in 2025-2026. A small delay has taken place in finalizing the site for a new 1 million unit expansion. We are making our best efforts to come to a quick decision in this matter.”

He said electric cars will be adopted “gradually” by consumers and in the meantime, other green technologies such as hybrid, CNG, biogas and ethanol should also be promoted.

“The importance of hybrid cars is obvious. I have been repeating this frequently. Hybrid cars are not a vehicle that has a conflict with electric cars. Hybrid cars are essentially required to reduce the pollution and oil consumption of vehicles that are non-electric. There is a huge market out there for every single electric car that is produced, and which meets the customer’s requirements,” he noted.

He mentioned that the first electric car from the stable of MSIL will be launched in the next few months. He stated that the initial batches of this electric car would be exported to Japan and Europe and it would then be introduced in India. “Electric cars are a priority not just for MSIL but for other companies too…By 2030-31, we would have six electric cars in our portfolio.”

The biggest challenge in front of electric cars is the cost of battery technology — which comprises 40 per cent of the total cost of the car — and it needs to be brought down significantly, he mentioned.

As India aims to be carbon neutral by 2070, automakers are divided over the best path forward. Japanese mass market players like Maruti Suzuki, Toyota, and Honda are pushing for tax cuts on hybrids, arguing that EVs (electric vehicles) alone can’t bear the entire burden of reducing emissions. However, carmakers like Tata Motors, Hyundai, Kia, and Mahindra & Mahindra insist that only a full commitment to EVs can truly decarbonise India’s roads. While petrol and hybrid cars come under the 28 per cent GST slab, electric cars come under the five per cent GST slab. 

First Published: Aug 27 2024 | 1:06 PM IST