New Delhi, Nov 18 (UNI) Industry icon Rahul Bajaj today refused to heed to Finance Minister P Chidambaram's advice to industry to cut prices, saying that the lower prices of two wheelers will lead to a price war, but asked the government instead to reduce interest rates on the item of common man's use.
Mr Bajaj, who has been a former CII President, said a price reduction will not mean an increase in the market share of automobile manufacturers.
He said two wheeler sale have plummeted from a double digit figure to a single digit and even may go into the negative zone.
He charged the banks are aware that auto industry was being starved off loans to its customers and several pleads in this regard have fallen on deaf ears.
He said more than the auto companies, the fund requirement was that of the retail customers and felt that banks were giving too much weightage to the housing sector for its lending operations, ignoring the requirement of two-wheeler customers.
Mr Bajaj, who is a Rajya Sabha MP, is known for his outspoken views unlike many CII spokespersons, past and present.
"I request the Finance Minister, private and public banks, and the RBI Governor to ensure credit to a common man who is interested in buying two-wheelers,'' Mr Bajaj said.
He said the price cut is not the solution to the demand constraint, adding that three major players constitute 85-90 per cent of the market share.
"If one player reduces the price, the others will do the same...
so there is hardly any scope to increase the markets share," he said.
In fact, Mr Bajaj comments resembled the classical oligopolistic situation, where a price cut by few producers is considered hostile and it is for this reason prices remain sticky.
Mr Bajaj did not think that an excise duty reduction would solve all the problems of the industry, including the auto sector.
As two wheeler manufacturers operate on a narrow margin of five to five per cent, it was difficult for them to undertake price cut.
UNI SG/SBA AK DS1400