Maruti Suzuki chairman RC Bhargava said that the income tax relief on annual earnings of up to Rs 12 lakh will not revive demand for small cars.
During the Q4 earning call, only 12% of Indian households in India have income above Rs 12 lakh and the remaining 88% have income below that. Bhargava asked then how people below Rs 12 lakh income can afford cars costing Rs 10 lakh and above.
The business tycoon said that the cost of owning an entry-level car has grown by as much as Rs 90,000 units in recent years, and people have other expenditures.
“There is an increase in household expenditures. People are not going to put all their income tax savings, put it aside and use it to buy a car. They have other priorities also,” the chairman argued.
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He said that income tax relief announced during the budget session 2025 is not enough to encourage buyers to purchase cars.
“For the car sales to revive, small cars have to become affordable,” he said.
He said the government should recognize the fact that without the revival of the small car market, the auto industry’s growth will remain muted.
On India’s household income distribution, Bhargava cited data saying out of the 300 million households in the country, 200 million have income below $6,000.
“To buy a car costing Rs 10 lakh plus, you normally would need to be in this household bracket of Rs 12 lakh plus, and therefore car buying in India is largely restricted to this 12% of the households,” he stated.
“How can you get high growth if 88% of the country is below levels of income where they cannot afford these cars costing Rs 10 lakh and above,” he added.
According to Bhargava, the sale of small cars has declined by about 9% in the fiscal year 2025.
“So if 9% is the decline in cars which are bought by 88% of the people in this country, where will you get growth? I think it’s a fact which people have to look at and recognise,” Bhargava said.
With demand expected to remain soft in the domestic market, the car market leader would largely depend on exports for growth in the current fiscal, he said.
Maruti exported 3.22 lakh units last fiscal, the highest number ever in a financial year.