Maruti Suzuki Chairman RC Bhargava recently urged policymakers to ease tax burdens on compact automobiles, underlining that affordable, entry-level cars could offer a safer alternative for millions currently relying on two-wheelers for daily travel. In India, two-wheelers dominate urban and rural roads, but they expose riders to higher accident risks and weather challenges. By carving out a lower tax bracket for small cars, Bhargava believes the industry can spark a migration toward enclosed vehicles without hurting consumer wallets.
The push for tighter crash-test protocols and stricter emission regulations across global markets has pushed up manufacturing costs, especially for entry-level models. European crash norms, in particular, demand extensive redesigns and advanced safety features that add thousands of dollars to the sticker price. While these upgrades are vital for protecting lives and reducing pollution, they have inadvertently priced out the most budget-conscious segment of buyers in emerging economies.
Looking abroad for clues, India could draw inspiration from Japan’s Kei car system, which levies minimal taxes on vehicles under certain size and engine thresholds. Similarly, China’s wave of micro electric vehicles paired with local tax incentives has shown that consumers are eager to embrace tiny, efficient transport solutions when the price is right. Such frameworks have not only broadened mobility options but also catalyzed domestic manufacturing activity.
In my view, introducing a dedicated low-tax category for cars below defined dimensions and engine displacement could reinvigorate India’s small car landscape. Automakers would have a clear target for designing cost-effective models, while customers stand to gain a budget-friendly upgrade from two-wheelers. Challenges remain—like ensuring these vehicles meet safety and emission targets—but a balanced policy could marry affordability with responsibility.
Ultimately, a thoughtfully structured tax incentive for compact cars holds the promise of safer roads, greener cities, and a bustling small car revival. As Bhargava suggests, lowering fiscal entry barriers could be the key to steering millions of riders toward secure and sustainable four-wheeled transport—marking a pivotal shift in India’s mobility journey.
