Bumpy ride: Auto sales see sharpest ever decline in August

By: |
New Delhi | Published: September 10, 2019 2:02 AM

Auto sales: Commercial vehicle category was the worst hit as sales fell 54.30% y-o-y to 15,573 units.

Within PVs, passenger cars comprising models like Alto, Baleno, i20 and Tiago, crashed 41.09% y-o-y to 115,957 unitsWithin PVs, passenger cars comprising models like Alto, Baleno, i20 and Tiago, crashed 41.09% y-o-y to 115,957 units

Despite highest ever discounts, automobile sales across segments witnessed its sharpest-ever decline in August, dropping 23.55% year-on-year (y-o-y), as poor retail sales due to weak consumer demand continued to leave dealers saddled with high inventory.

Passenger vehicle (PVs) despatches, which fell for the tenth consecutive month, declined 31.57% y-o-y in August, worst-ever since Society of Indian Automobile Manufacturers (SIAM) started recording wholesale vehicle sales data in 1997-98. Within PVs, passenger cars comprising models like Alto, Baleno, i20 and Tiago, crashed 41.09% y-o-y to 115,957 units.

Analysts said inventory levels are higher than normal and retails are not picking up due to lack of easy credit availability, which will continue impacting the wholesales in the near term. “Retails in festive season will be key in the near-term though wholesales are likely to remain weak regardless due to BS-IV de-stocking,” analysts at Jefferies noted.

Two-wheeler volumes fell 22.24% y-o-y to 15,14,196 units, also the sharpest-ever decline as manufacturers including Hero MotoCorp and Honda Motorcycle continued to cut production to control inventory, which is at over 60 days. Two-wheeler prices have gone up by over 20% since September last year due to hike in insurance premium and new safety norms.

Analysts said another round of price hikes to be taken by the manufacturers from April 2020 on account of BS-VI emission norms will further impact demand. “We expect the industry to remain weak in the near-term on account of high and rising cost pressures,” analysts at Nomura wrote.

The worst hit was the commercial vehicle category, which fell 54.30% y-o-y to 15,573 units, the eighth consecutive month of decline, impacted by costlier finance options, the revised axle load norms and halt in several infrastructure projects. The government last year hiked the loading limit for CVs by 15-20%, as a result of which fleet operators got more bandwidth to load goods impacting the new purchases.

Anuj Kathuria, COO, Ashok Leyland, last week told FE that the hike in loading limit is still being absorbed which is dampening the demand to certain extent. “Demand was bad in August because there was some stock correction which everyone did,” Kathuria had said.

As attempts to revive sales via discounts and promotional packages failed, auto industry chief executives have been demanding a 10% cut in GST and easier access to finance availability, following thousands of job losses of temporary workers in the past six months. Slumping sales has forced automakers to shut down factories and reduce production shifts, leading to job cuts.

While OEMs have cut around 15,000 since April, over 300 dealers have shut shop leading to a job loss of around 2 lakh people.

Pawan Goenka, managing director at Mahindra & Mahindra (M&M), said whenever there was a slowdown in auto sales in the past, a cut in taxes has helped in revival. “When the 2013-14 slowdown happened, there was a 4% reduction in excise duty, in 2008-09, it was a 6% cut. Data says immediately after the reduction volumes went up,” Goenka said last week.

The government, however, has so far been non committal on any rate reduction. According to the internal estimates of the tax department, the government’s GST revenue could take a hit of at least Rs 30,000 crore if the demand is met.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Coronavirus or Demonetisation? Which one helped India’s digital payment more?
2Google to pump $10 billion in India, says Sundar Pichai; this will be key area of investment
3Google to invest Rs 75,000 crore to help accelerate India’s digital economy