PV sales down 11.2% in June on pre-GST jitters
Sales of passenger vehicles in June declined the sharpest since March 2013, as dealers stayed away from buying stock due to ambiguity over the goods and services tax (GST). Passenger vehicle sales declined 11.21% to 198,399 units. In March 2013, passenger vehicle sales had declined 13%. Car sales declined 11.24% to 136,895 units—the sharpest since May 2013 when they declined 11.7%.
The Society of Indian Automobile Manufacturers (Siam), however, ruled out any longterm impact and said other macroeconomic factors were good enough for the industry to record 7-9% growth during the current fiscal year. “It is a oneoff instance,” said Siam deputy director general Sugato Sen. “Things should be normal from July.”
Siam reports wholesale numbers and not the ones billed by companies to customers.
To automakers’ delight, raw material prices, which were on the rise, have started to soften in the last few months. For instance, natural rubber, hotrolled steel, cold-rolled steel and lead have declined 13%, 2.41%, 2.16% and 6.5%, respectively. Coupled with declining vehicle prices and lower inflation, this is expected to boost sales.
But Siam warned that the cost of ownership is expected to rise by 1-2% in 2017-18, as a result of increasing fuel costs and insurance expenses. Oil prices are expected to remain higher ($44-48 per barrel in 2017, up from $42 in 2016), which would contribute to the increasing cost of ownership, it said.
“The growth rate in the PV market is likely to accelerate going forward. We expect an overall sales growth in low teens during FY18, owing to reduced vehicle prices as a result of GST, expectations of a good monsoon season, new model launches and low fuel prices as well as financing costs,” said Rakesh Batra, partner at consulting firm EY.
With the GST regime kicking in, luxury cars and SUVs are expected to witness an impetus, due to a considerable reduction in taxes, Batra said. “A key risk would be increased levy of registration taxes by state governments, which is outside the scope of GST,” he added.
Siam said that it expects sales of medium and heavy commercial vehicles, a key indicator of economic activity, to drop further. “With the recent shift from BS-III (Bharat Stage III emissions norms) to BS-IV, transporters are expected to delay purchases due to price increase and to wait for SCR (selective catalytic reduction) and EGR (exhaust gas re-circulation) performance reviews,” said Sen. EGR and SCR are tools used to reduce vehicle emissions.