1. GST impact on cars: Uncertainty ensures sales stay subdued; Maruti Suzuki reports 1.2 pct rise to 93,263 units in June

GST impact on cars: Uncertainty ensures sales stay subdued; Maruti Suzuki reports 1.2 pct rise to 93,263 units in June

It has been a disappointing June for automobile manufacturers with most companies reporting either flat or falling sales as they grappled with the uncertainties of the rollout of the Goods and Services Tax (GST).

By: | New Delhi | Published: July 4, 2017 9:15 AM
Several auto companies had opted to pare inventories given the uncertainty surrounding the new levy.

It has been a disappointing June for automobile manufacturers with most companies reporting either flat or falling sales as they grappled with the uncertainties of the rollout of the Goods and Services Tax (GST). Several auto companies had opted to pare inventories given the uncertainty surrounding the new levy. Dealers too were opting to trim stock and offer discounts to woo customers. Car manufacturers reported subdued volumes while the recovery in rural and semi- urban markets and the onset of the marriage season helped drive up volumes for two wheeler players. Volumes in the medium and heavy commercial vehicle segment recovered marginally during the month after the adverse impact of the Supreme Court ruling on the sales BS 3 vehicles.

Hero Moto Corp –the country’s largest two wheeler manufacturer – reported a 14% y-o-y increase in total volumes. Almost 60-65% of the total sales of Hero come from the rural market. Maruti Suzuki –the country largest car company reported a 1.25% y-o-y increase in wholesale volumes to 93,263 units in June, the lowest for the company in two years.

The domestic two-wheeler industry is expected to witness strong recovery in FY18 post decline of 6% since demonetization, analysts at Motilal Oswal wrote in a report. “Motorcycle segment volume growth was supported by the wedding season and the very successful in-market activations for Hero’s portfolio of brands,”a spokesperson for the company observed. Chennai based manufacturer TVS Motors also reported 10.4% y-o-y increase in wholesale dispatches of two wheelers to 2,28,518 units. Motorcycles volumes during the same period increased by 17.4% to 95,542 units.

Japanese manufacturer Honda two-wheelers (HMSI) – the country’s largest scooter manufacturer – reported a rather subdued 2% y-o-y increase in wholesale volumes 4,16,498 units during the month. Pune-based Bajaj Auto reported a decline in motorcycle volumes due to the increasing completion from Hero in the entry level segment. Volumes in the domestic market declined by 36% y-o-y to 1,08,109 units. “For Q1FY18, Hero Motocorp and Honda Motorcycles will push BS-IV stock into the system which will boost growth. But Bajaj Auto had already started BS-IV dispatches during Q4FY17 and hence its wholesale volume growth will underperform peers,” analysts at Edelweiss noted in a report.

In the commercial vehicles segment, the volumes have started to increase marginally. Chennai based Ashok Leyland reported a 6% y-o-y increase in volume to 9,202 units in the M&HCV segment. Volumes in the segment have been declining since the Supreme Court passed an order banning the sale of BS 3 vehicles which led to significant pre buying in March. The volumes in the minis segment which grew in the first two months of the fiscal year declined by 7.95% y-o-y while the same in the utility vehicle segment increased by 43% y-o-y. The volumes of Ciaz –a mid size sedan also increased by 41% y-o-y to 3,950 units.

Car makers like Hyundai, Mahindra and Mahindra and Toyota have witnessed decline in their wholesale volumes. Hyundai –the second largest car maker –reported a 5% decrease in volumes to 5.6% y-o-y to 39,807 units. “In a challenging market fueled with speculations on the GST tax structure Hyundai registered highest ever half year domestic sales at 2,53,428 units with a growth of 4.1% on account of strong acceptance of super performer brands Grand i10, Elite i20 and Creta in pre-GST business environment.

We expect a positive demand pull post the successful implementation of GST in the coming months as industry will witness heightened level of customers’ interest in a seamless unified single market,” said Rakesh Srivastava, director – sales and marketing, HMIL. M&M also resorted to the strategy of controlling the dealer inventory and as result the wholesale volumes declined by 5% y-o-y to 16,170 unit in June. Apart from GST, the lack of demand for new products like TUV 300 and KUV 100 is also another reason for the decline in sales.

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