After an earlier contribution to the Business Today, I was widely seen by many in the auto industry to have committed the ultimate sacrilege by questioning, what large sections of the industry perceive as its divine right, to unapologetically indulge in blatant profiteering at the expense of India’s hapless consumers. (I was actually told on one TV debate that it was needed to fund research though of course no evidence of such worthy pursuit was provided!!) I believe therefore that I must return to the subject – as part of the debate on what ails the industry, and more particularly in the context of the suggestions on GST restructuring sought by the FM.
Beyond the macroeconomic and structural issues, I continue to believe that perhaps a large part of the industry’s woes can be traced back to its unbridled avarice. For some reason, the industry, particularly multinationals believe they must earn in a year an average return in India at least 200% higher than what they do globally.
A large part of these earnings is directly attributable to the fact that India’s consumers are charged – before GST and dealer margins – up to 25% more for often lower spec vehicles, than what international consumers pay. A fairly significant portion of the profits also arise from practices that would be considered unacceptable by trustbusters in most developed countries. But the latter issue is a Pandora’s box that I shall deal with, at length, another time. Let me, for now, confine my attention to the issue of vehicle pricing and GST restructuring.