GST blues: car sales slump 11.2% to 51-month low in June

The unrolling of the goods and services tax (GST) regime has clearly had a negative impact on car sales, with the sale of domestic passenger vehicles declining 11.21 per cent during June as compared to the same period last year, according to data released by the Society of Indian Automobile Manufacturers (SIAM). This was the steepest decline in 51 months.

Propped up by two-wheeler sales which saw a 4 per cent growth during the month, the industry as a whole managed to post a muted growth of 1 per cent. Sales of commercial vehicles grew by just 1.44 per cent, while three-wheelers declined almost 25 per cent.

De-growth in the automobile sector comes amid India posting 11.34 per cent growth during the period between January and May, another report by SIAM reveals.

The data from SIAM, which captures wholesale dispatches from companies to dealers, shows passenger vehicle makers dispatched 198,399 units in June, about 11 per cent lower than the volumes in corresponding month last year. This was the first decline in six months.

Wholesale figures declined last month as dealers were not making fresh purchases as they awaited the GST fallout. The government had clarified it would give 100 per cent input tax credit on excise duty but not on cesses, which together amount to 5-6 per cent of the cost of a vehicle. Dealers accordingly focused on selling existing stocks to prevent losses, said SIAM director-general Vishnu Mathur.

Passenger vehicle sales had recovered from January after being hit during November-December by demonetisation. The decline in June was the steepest fall since March 2013, when sales fell by 13.01 per cent.

Most manufacturers, including Hyundai, Mahindra & Mahindra, Toyota and Tata Motors, reported a decline. Market leader Maruti Suzuki clocked a growth of one per cent.

SIAM has not yet revised its FY18 forecast for passenger vehicle sales. It had projected a growth of 7-9 per cent.

Two-wheelers, the largest automobile segment by volume, saw sales expand four per cent to 1.52 million units in June. Sales of scooters grew over 10 per cent to 497,478 units, while motorcycles grew over 2 per cent to 964,269 units. ''Rise in rural income and prospects of a good monsoon are driving motorcycle sales,'' said SIAM deputy director-general Sugato Sen.

Sales of three-wheelers, mainly auto-rickshaws, have been weak since demonetisation and sales declined 25 per cent in June to 36,491 units. Commercial vehicles also saw a muted performance and grew at just 1.44 per cent. Within this segment, light commercial vehicles grew by 7 per cent to 35,715 units, while medium and heavy commercial vehicles registered a drop of over 6 per cent to 21,175 vehicles.

Experts see a growth ahead for the industry. ''We expect the Indian automotive market to witness growth in several pockets in FY18, driven by a good monsoon, lower interest rates, strong rural economy and smooth implementation of the GST pushing automakers to offer price cuts on vehicles,'' said Rakesh Batra, partner and leader (automotive) at EY India, told Business Standard.