Passenger vehicle sales up 15% in July as GST blues recede

Passenger vehicle sales rose over 15 per cent in July as dealerships restocked after the implementation of the Goods and Services Tax. It should be noted that vehicle 'sales' in India are measured by dispatches to dealers rather than actual customer purchases.

According to data released by the Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales rose by 15.12 per cent to 2,98,997 units in July from 2,59,720 units in the same month last year. Car sales were up 8.52 per cent at 1,92,773 units as against 1,77,639 units in July last year, while utility vehicles sales rose by 35.72 per cent to 86,874 units.

Dealers had stopped building stocks in the second half of June so as to avoid transition losses arising out of the goods and services tax that came into effect from July 1. Accordingly, June was a month of decline.

"In June, dealers were liquidating their stocks while the reverse has happened in July. Dealers have replenished their stocks across segments last month," SIAM director general Vishnu Mathur told reporters in Delhi. It will be clear by next month only as how retail sales have happened during the period, he added.

He, however, said the second half is expected to be better in terms of sales on the back of good monsoons and rural sales also expected to pick up.

The growth comes after a double-digit decline of 11 per cent in June, when companies regulated sales and offered discounts to reduce dealers' loss on pre-goods and services tax (GST) inventory.

Six leading companies recorded high double-digit growth as they replenished the inventory at dealerships.

However, the industry is unlikely to sustain this high growth in August. This is because retail sales have not been strong in July.  India measures car sales by dispatches to showrooms rather than actual customer purchases.

Buyers advanced purchases in June to take advantage of the deep discounts and offers rolled out by companies and dealers to clear pre-GST inventory.

Market leader Maruti Suzuki India led the pack in the passenger vehicles segment with Ford and Honda Cars also reporting double digit expansion in domestic market sales.

Homegrown auto companies Tata Motors and Mahindra & Mahindra too clocked a healthy increase in sales.

Maruti posted a 22.4 per cent increase in domestic sales at 1,54,001 units as against 1,25,778 in July 2016. The company's growth was driven by compact segment comprising Swift, Estilo, Dzire, Baleno and Ignis which saw a 25.3 per cent increase to 63,116 units in July.

Sales of Marut's mini segment cars, including Alto and WagonR, went up 20.7 per cent to 42,310 units, the company said in a statement.

Tata Motors said its passenger vehicles sales in the domestic market grew 10.23 per cent to 14,933 units. There was improved customer buying sentiment post GST, Tata Motors president passenger vehicles business unit Mayank Pareek said.

M&M saw a 13 per cent increase in its domestic sales at 39,762 units last month compared to 35,305 units in July 2016. A good monsoon, successful GST rollout and a good runup to the festive season gives the company confidence of achieving robust growth in second quarter, M&M president automotive sector Rajan Wadhera said.

Honda Cars India Ltd (HCIL) posted a 21.74 per cent increase in its domestic sales at 17,085 units in July. It had sold 14,033 units in the same month last year, HCIL said. The post-GST price benefits, healthy monsoon and onset of festive season in many regions from August will give another boost to our sales, HCIL president and CEO Yoichiro Ueno said.

Ford India reported an 18.96 per cent rise in its domestic sales at 8,418 units last month, Ford India president and managing director Anurag Mehrotra is optimistic going ahead.

"A good monsoon, conducive financing rates and consumer confidence during festival season will provide a good impetus for the industry,'' he said.

The country's second largest carmaker, Hyundai Motor India, however, reported a 4.38 per cent increase in its domestic sales at 43,007 units in July.

The company had sold 41,201 units in July 2016. Hyundai's director sales and marketing Rakesh Srivastava said that strong support from the lowering of prices on account of GST implementation and good monsoon would increase customer confidence and sentiment towards vehicle buying.

All companies have cut prices of cars after GST to pass on the benefit of a lower tax burden. The prices of small cars have come down by 1-2 per cent, while SUVs and luxury cars have turned cheaper by up to 10 per cent. Companies are hopeful the price cuts will expand the fifth biggest car market.