India must not give in to any 'bullying': MSIL's RC Bhargava on tariffs

India must “not give in to any kind of bullying” after US President Donald Trump raised tariffs on Indian imports to 50 per cent this month, said Maruti Suzuki India (MSIL) Chairman R C Bhargava on Thursday, urging national unity to uphold dignity and support the government.

 

On the domestic front, he said reducing GST on small cars could help counter the economic strain created by American tariffs.

 

“My hope and my expectation is that subject to approvals by the GST Council, we will see a revival of the small car market, overall faster growth of the car industry, more industrial activity, and larger generation of employment opportunities. I think all of this is needed in the current times when the tariff problems are creating a difficult situation in other parts of the Indian economy,” Bhargava said during the company’s annual general meeting.

 

 

MSIL expects the GST Council, which meets on September 3 and 4, to reduce the tax rate on small cars from 28 per cent to 18 per cent, a move he said would particularly benefit lower-end consumers. “We are hopeful that the proposal which the Prime Minister made (on August 15 from Red Fort) will result in the GST on small cars reducing to 18 per cent. But we have to wait till the official announcement is made.”

 

He said MSIL’s speed of expansion of production capacity is also linked to the GST council’s decision and its impact on car demand in India.

 

Sales of small cars (sedans and hatchbacks) have been declining in India for several years, but strong SUV growth has so far driven overall industry expansion. That momentum has now weakened, with passenger vehicle sales dropping by 1.6 per cent year-on-year in the first quarter of 2025-26 to 1.011 million units.

 

On tariffs, Bhargava said the situation required collective resolve. “We are all aware of the global uncertainty which has been caused in recent months. President Trump has in many ways forced nations to think about conventional policies and relationships, in particular, the use of tariffs in diplomacy is being seen for the first time. Our tariff rate has gone up to 50 per cent. And I believe it is our duty as Indians to do our very best to support the government and maintain our dignity and respect, and not give in to any kind of bullying in this matter. The nation has to stand united at this point in time,” he said.

 

Bhargava also pressed for parity between electric and hybrid cars under the GST framework. “The taxation on electric cars and hybrid cars in Europe and the United States is very similar,” he said. In India, electric cars are currently under the 5 per cent GST slab while hybrid cars come under the 28 per cent slab.

 

“In India we believe that there is a need for technologies to be encouraged by the taxation system, not only EV technology but any technology which leads to cleaner cars, reduction of oil consumption, reduction of pollution in the air and which leads us towards net zero. All technologies, depending on their contribution towards moving to net zero, should be incentivised,” he mentioned.

 

He recalled that the introduction of BS-6 norms in 2018-19 had raised vehicle costs, slowing down small car sales and making it harder for two-wheeler owners to upgrade to safer cars. To address this affordability gap, Bhargava pointed to Japan’s experience with Kei cars in the 1950s. These were ultra-compact cars, designed with lighter safety regulations and lower taxes, which gave scooter owners a low-cost alternative to upgrade to four-wheelers. “I think India needs to consider something similar to that,” he said.

 

On supply chain concerns, Bhargava flagged risks from restrictions on rare earth magnets, calling it “both a warning signal” though he added that with government intervention the issue may be resolved soon. “Our government has entered into a landmark free trade agreement with the United Kingdom and this could form a template for future agreements,” he said.