Auto shares drag on government’s proposal to hike registration charges on new vehicles

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Published: July 29, 2019 1:25:44 PM

Shares of auto companies slumped in early trading on Monday after the government proposed to hike registration charges on new vehicles.

China, global used car export market, car export market, global auto industry, used cars, passenger vehicles, China automobile industry, Used car exportsAuto shares drag after the government proposed to hike registration charges on new vehicles

Shares of auto companies slumped in early trading on Monday after the government proposed to hike registration charges on new vehicles. While the S&P auto index fell 3.14 per cent at 15,676.43, the Nifty auto also tumbled nearly 3 per cent to 6,932.80. Tata Motors, Apollo Tyres, Bajaj Auto Ashok Leyland, TVS Motor, Maruti Suzuki and HeroMoto Corp were trading in the red today after the road ministry proposed to raise registration charges.

The road ministry has proposed to increase registration fees in a draft notification for new vehicles and for renewing it. While for the registration of a new car, one will have to pay Rs 5,000, for renewing the registration, one will have to shell out Rs 10,000. Currently, both the charges are Rs 600. For two-wheelers, the new charges for registration are Rs 1,000 and for renewing it will cost Rs 2,000. For the imported cars, the draft notification has proposed to increase the charges by eight times to Rs 40,000 from Rs 5,000.  

The government’s proposal to increase registration fees on automobiles will increase the cost of two-wheelers, cars and commercial vehicles by 1-2 per cent which can further depress sales of automobiles in India in the near term, Kotak Institutional Equities noted. The auto sector is likely to report muted volume performance in the first half of FY20, though it may improve in the third quarter of FY20 with pre-buying ahead of BS-VI implementation, according to Reliance Securities which maintained a cautious view on the sector.

Meanwhile, most of the auto companies reported lower revenue for the April-June quarter which showcases slowdown in the auto industry. Tata Motor’s consolidated net loss almost doubled in Apr-Jun to Rs 3,680 crore on account of stress in the automobile sector. Its net loss stood at Rs 1,863 crore in the first quarter of FY19, whereas its consolidated revenue declined 29 per cent to Rs 60,830 crore on a quarterly basis and 8 per cent year-on-year.

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