'Will be shortsighted to make big price increases due to West Asia war'

Maruti Suzuki Chairman R C Bhargava questioned the relevance of mandatory vehicle-to-vehicle communication norms, saying India's diverse driving conditions require differentiated standards

Days after Maruti Suzuki announced its results for the first quarter of financial year 2026-27 (Q1FY27), R C Bhargava, chairman of the country’s largest car company, speaks with Surajeet Das Gupta about the challenges from the West Asian crisis and the opportunities that the firm is looking at in the near future. Edited excerpts: 

With the goods and services tax (GST) rate reduction, the car market was booming. But the recent price rises announced due to increase in costs due to the West Asia crisis could impact sales. How are you planning to handle this challenge? 

We have a car market that has revived after a long time. It will be shortsighted to put a dampener on customers if companies make big price increases primarily linked to cost escalation due to the war in West Asia. 

In the first quarter, Maruti decided that it has enough resilience to absorb most of the short-term increase in costs. Therefore, volumes in the first quarter went up by 30 per cent, but profit fell by 10 per cent. We are comfortable with this, as one has to take a longer term view beyond a quarter. If stable peace returns in West Asia, the increase in costs will go away in three to four weeks. We are clear that we will not pass on the entire cost increase to customers, though some price increase is coming. 

What is your growth estimation of the car market in the next few years? 

We are still in the process of making an estimation for the next five years. Before GST rate reduction, passenger car sales growth was 3-4 per cent. After GST cut, it went up to 5-6 per cent in small cars, which is now a given growth rate even if there are adverse circumstances. But if conditions become favourable and there is government support, we should easily have double-digit growth. 

Do you expect the small car market to plateau once the initial euphoria over the GST cut wears off? 

There is a large suppressed market for small cars, while many said it was over. With GST cut, it is now affordable for the large lower end of the upper middle class segment to buy a car. We have not come out with any new car models in this segment, but models like Wagon R have become one of the biggest sellers. So, I don’t see this market collapsing until some regulatory challenges come to the fore. 

 What steps are being taken to increase production and reduce long car delivery wait times, and when can customers expect normal delivery schedules, given that the new Brezza model is receiving 2,000 to 3,000 daily bookings? 

Our inventory levels with dealers are at only 13-15 days, well below the target of 30 days. We are hopeful of clearing the backlog of orders of around 130,000 in the next two to four months. For the new Brezza, we have put in a separate line in Kharkhoda. We are ramping up production capacity from 2.4 million to 2.9 million by the end of FY27. In FY29, we will add another 250,000 capacity. The Gujarat plant is expected to get rolling only in 2029, and by FY31, we should have a capacity of 3.3-3.5 million, going up to 4.4 million by FY33 maybe. We are waiting to finalise our five-year projection and will then decide whether we need to bring forward the completion of the Gujarat capacity due to acceleration in demand.

 

Automakers must not only comply with CAFÉ-III norms but also establish a clear sustainability pathway towards net-zero carbon emissions. What is the action on this? 

We have corporate average fuel efficiency (CAFÉ) norms and a global target to achieve zero carbon. All companies have a sustainability committee, which prepares a road map to reach zero carbon. But the paths to zero carbon emission is not consistent with each other. CAFÉ norms measure emission generated only from the tank to the wheels but cuts out emissions generated before the fuel reaches the car. Sustainability goals require whether we are using coal-fired electricity for charging or making batteries, both of which generate carbon. 

You have been pushing for biogas as the zero-carbon fuel. What has been the progress on this front? 

The board has just approved ~500 crore for four pilot projects for producing biogas. As we have no experience, we will learn how to procure raw materials, create a supply chain, see whether it is a good business proposition for farmers, and also build cars. We will take a final commercial call to enter biogas-powered vehicle segment only after that. 

You seem to have made a big push in exports. What is the strategy here? 

Despite the war, exports have held out in the first quarter, and we expect to end FY27 at 4.8 lakh vehicles to Europe. A bulk of this 4.8 lakh vehicles would be electric. We already account for 50 per cent of all car exports from India.

Even when the Gulf market was closed, others countries picked up our products.