Car sales skid for 4th month in a row ahead of tax gifts

Car sales in India fell for the fourth straight month in August as automakers regulated dispatches to dealers ahead of the announcement of the revised goods and services tax (GST) rates.

A total of 321,840 vehicles were dispatched from factories to dealerships last month, an 8.8% decline from 352,921 units a year earlier, showed data issued by industry body Society of Indian Automobile Manufacturers (SIAM) on Monday. Sales of three-wheelers rose 8.3% from a year earlier to 75,759 units. It was the highest-ever sales in the segment for August.

Two-wheeler sales grew 7.1% to 1,833,921 units. While scooter sales climbed 13% to 683,397 units, motorcycles reported a 4.3% rise to 1,106,638 units last month. Sales of mopeds fell by 1.5% to 43,886 units.

"The landmark decision of the government of India to reduce GST rates on vehicles will go a long way in enabling broader access to mobility and inject fresh momentum into Indian automotive sector in upcoming festive season," said Rajesh Menon, director general, SIAM.

Under GST 2.0, tax rates on internal combustion engine (ICE) vehicles have been lowered with effect from September 22. Small cars will attract 18% tax, compared to 29-31% currently while larger utility vehicles and luxury cars will face a 40% tax compared to 43-50%. The lower taxes and resultant drop in car prices give automakers headroom to drive sales during the crucial festive period. Partho Banerjee, senior executive officer at the country's largest carmaker Maruti Suzuki said many carmakers curtailed dealer dispatches in August ahead of the implementation of the revised GST rates.

"But the indications in the market are positive. We have seen bookings in Kerala during Onam go up by 16%. During Ganesh festival too we have seen good inquiries and footfalls," said Banerjee in an interview recently. Nalinikanth Gollagunta, CEO, automotive division, Mahindra & Mahindra, too said the company is looking forward to the impact of the GST rationalisation, "which would be a demand driver through the festive season."