1. Diwali 2017 auto sales: Mumbai car dealers hit by slowdown in festive season

Diwali 2017 auto sales: Mumbai car dealers hit by slowdown in festive season

The GST Council, in its October 6 meeting, had announced cuts in taxes of various items that come under the purview of the new indirect tax. Customers are now waiting for a tax cut on passenger vehicles.

By: | Mumbai | Published: October 17, 2017 6:18 AM
Dealers in Mumbai noticed a flurry of enquiries in the first few days of the month. They were, however, not able to convert these into bookings. “While many enquiries were being made at the start of the month, only 10% of these actually converted into bookings for us,” said a Honda showroom’s sales executive. (Reuters)

With the festive season this year spreading over two months, most car dealers in Mumbai are witnessing a slowdown in bookings in October, compared with the same period last year. This has resulted in a build-up in the inventory of car dealers, who may not add additional inventory this month. A Tata Motors dealership in Mumbai said, “We saw a peak in bookings during Dussehra on September 30. Post that, sales have failed to pick up to the usual October levels for us”. A sales manager at a Hyundai showroom in the city said there was considerable build-up of inventory at their dealership after they stocked up in September. “We had added adequate inventory in September and are unlikely to add more stock in October. Now, we are directly planning to add more inventory in November,” he said. Another Hyundai dealer was offering up to Rs 70,000 cash discount on the Grand i10, along with an exchange discount of Rs 25,000. The dealership is also offering a discount of Rs 20,000 on the Xcent. Dealers in Mumbai noticed a flurry of enquiries in the first few days of the month. They were, however, not able to convert these into bookings. “While many enquiries were being made at the start of the month, only 10% of these actually converted into bookings for us,” said a Honda showroom’s sales executive. According to the dealers, the major reason for the slowdown this month has been the expectation of the buyers that the GST on passenger vehicles may be reduced by the government. “Following the GST Council meet in the first week this month, when the council slashed rates on various items, carbuyers are now anticipating a reduction in rates of GST levied on cars,” said the Hyundai dealer.

The GST Council, in its October 6 meeting, had announced cuts in taxes of various items that come under the purview of the new indirect tax. Customers are now waiting for a tax cut on passenger vehicles. Analysts at Crisil say that at the start of October, there was an unusually high level of inventory seen with the dealers. Binaifer Jehani, director, Crisil Research, said, “Dealers had 40-45 days of inventory at the start of September 2017, which is a little higher than normal inventory, in anticipation of healthy retail sales. The inventory got liquidated on account of festive demand during Navratri. September-end/October start inventory is again at similar levels so as to capitalise on the Diwali demand.”

An early start to the festive season this year pushed sales of passenger vehicles (PVs) up by 11% year-on-year in September as car manufacturers expect bumper sales in Diwali. In the first quarter of the fiscal, companies had posted poor sales figures owing to de-stocking at the dealerships ahead of GST in June. However, volumes have received a big boost in the second quarter, thanks to the re-stocking by dealers in July as the country shifted to the new indirect tax regime, and an early festive season. An analyst at Motilal Oswal said, “Given the waning regulatory impact, the automobile sector has witnessed gradual volume growth August onward, supported by pre-festive inventory build-up and improving rural sentiment.” A Nexa showroom sales executive said, “The mood at the dealership is celebratory, but only enquiries are being made. We are hoping that purchases will start from Dhanteras.” He added that the new S-Cross and the sedan, Ciaz, are the most in demand at the moment. Nexa is offering a Rs 20,000 as discount in exchange for an old car for the Ignis and the Ciaz models. All its models are on an average waiting period of 4-8 weeks.

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