A huge contraction in auto sales in the month of August signifies that the steps taken by the Centre to revive the sector didn’t have much effect, according to experts. Passenger vehicles (PV) on an average fell over 30 per cent last month with major carmakers Tata Motors and Honda Cars India registering more than 50 per cent decline in sales.
“The series of announcements on credit availability and reducing the cost of credit that were made do not seem to have percolated down to the NBFCs which support the bulk of finance for the automotive industry. The consumer sentiment also continues to be low and there is clearly a trust deficit in lending money to the dealers,” said Rajan Wadhera, president, Society of Indian Automobile Manufacturers (SIAM). The manufactures also want the government to come up with an integrated incentive based scrappage policy covering all segments of the industry.
With sales across segments on a declining spree for more than a year, automakers are now pinning their hopes on Goods and Services Tax (GST) rate cut and upcoming festive season to revive demand.
“The ability of the industry to provide large discounts is limited and this only highlights need for the government to consider reducing the GST rates from 28 per cent to 18 per cent which would significantly reduce the cost of vehicles and in turn create demand,” Wadhera said, adding “As the festival season is round the corner, it is imperative that these decisions are taken quickly and announced without delay so that the industry could hope for a better festival season that could harbinger a recovery in the industry.”
Amid slowdown, Finance Minister Nirmala Sitharaman has said the government would take a proposal for lowering GST rate on automobiles to the federal indirect tax body, the GST Council. Earlier, she had announced measures such as directing banks and non-banking financial institution to increase liquidity to the sector, clearing air on the registration of BS-IV vehicles, and deferring higher registrations fees to push the sector.
The GST Council is expected to meet in Goa on 20 September. However, with gross GST collections slipping below Rs 1 lakh crore mark to Rs 98,202 crore in the last month, it would be very difficult for the council to take such steps.
According to automakers, the sales will revive in the upcoming festive season, when demand reaches the highest level. Further, a host of new launches can lure customers to buy vehicles. “We are concerned that the market is falling at a double-digit figure. We are also optimistic and have to wait and watch how the festival season pans out,” said Kenichi Ayukawa, CEO, Maruti Suzuki.
Maruti’s domestic PV sales fell 36.1 per cent — one of its sharpest dips in the last two decades to 93,173 units last month. This is the second consecutive month when the carmaker’s monthly sales fell below 1 lakh unit mark.
“Marking the onset of the festive season, we will drive positive sentiments with special offers...” said Mayank Pareek, president, PV unit, Tata Motors.