Amid rising global trade tensions and an increasingly complex geopolitical environment, R.C. Bhargava, Chairman of Maruti Suzuki India, has flagged serious concerns about the long-term prospects of India’s passenger vehicle industry.
In annual report for FY25, Bhargava highlighted declining sales growth and called for targeted government action to revive the sector.
US tariffs and diplomatic headwinds
Bhargava’s remarks came just days after US President Donald Trump imposed a 25% tariff on Indian imports, effective August 1, citing India’s continued oil and defence trade with Russia. Trump also warned of a potential increase in duties within 24 hours unless India stopped purchasing discounted Russian crude.
Despite this pressure, Bhargava expressed trust in New Delhi’s ability to safeguard its interests. “I have full confidence in the ability of our government to protect national interests and do what would be best for the country,” he stated in the company’s latest annual report.
Rare earth magnet shortages disrupt EV Plans
Beyond tariffs, supply-side challenges are also weighing heavily on the auto sector. China’s decision to restrict exports of rare earth magnets-a vital component in electric vehicles and hybrids-has led to fresh uncertainty.
Bhargava revealed that Maruti’s rollout of its new battery-powered SUV, the e-Vitara, faced delays due to these disruptions. The model, a global offering to be built at the company’s Gujarat plant, is slated for export to over 100 countries.
While Maruti has so far avoided production halts, the impact of limited magnet supply was felt in the early months of FY26.
Slowdown in growth raises red flags
Over the past six years, India’s car industry has posted modest annual growth of just 4.4%. The situation has worsened in recent quarters: FY25 ended with only a 3% rise in retail sales, and the first quarter of FY26 registered a 1.3% decline.
“The slowdown is especially concerning given India’s strong GDP performance,” Bhargava noted. He pointed to low levels of car penetration-about 34 cars per 1,000 people-as an indicator of untapped demand, particularly among two-wheeler users.
He attributed the stagnation in part to the shrinking entry-level segment, which traditionally serves first-time car buyers. Rising prices, driven by stricter emission norms, regulatory compliance costs, and an unchanged tax framework, have priced out many potential customers.
Bhargava dismissed suggestions that these buyers are simply upgrading to SUVs. “If that were the case, overall industry growth wouldn’t have slowed,” he argued.
Lessons from China and Japan
Drawing comparisons with other economies, Bhargava cited China’s approach, where government support helped car production jump from 2 million units in 2000 to 25 million by 2017. Supportive infrastructure, consumer subsidies, and R&D incentives played a key role.
He also referenced Japan’s post-war boom between 1955 and 1970, when rapid industrialization was closely tied to car manufacturing and sales growth.
By contrast, India produced just over 5 million passenger vehicles in FY25. Bhargava urged policymakers to view car ownership not merely as consumption but as a driver of employment and economic development.
Trade deals and future strategy
Looking ahead, Bhargava welcomed the India-UK Free Trade Agreement signed in July, suggesting it could serve as a model for future deals. He believes such agreements can open new export avenues, supporting both scale and competitiveness for Indian manufacturers.