Lack of clarity on GST dampens festive season sales for automobile firms as buyers hold back
MUMBAI: It was a dull Diwali for carmakers this year as uncertainty over the impact of the goods and services tax (GST) held back buyers, particularly businesspeople, said dealers and executives at car firms.
Retail volumes failed to keep pace with the large number of dispatches rolled out in the last couple of months by automakers in anticipation of strong sales over the festive season that concluded with Dhanteras on October 17—the first day of Diwali. Now, auto firms may have to reduce inventory in the months ahead.
Dhanteras is one of the most important days in the festival calendar for auto makers, consumer durables companies and real estate firms, as the day is considered auspicious for big ticket purchases.
With the majority of the businesspeople still trying to familiarise themselves with the GST, they are reluctant to make expensive purchases, said dealers.
“Businessmen are still trying to understand the GST and the impact on the overall cashflow; therefore, they are deferring purchases,” said a dealer in New Delhi-based Maruti Nexa dealership, the premium sales network of Suzuki India Ltd. Maruti sold a total of 30,000 cars, the same as what it sold during Dhanteras last year, said an official at Maruti Suzuki India, who declined to be identified.
A Hyundai Motor India Ltd dealer added, “Despite no product availability issues and better schemes than last year, our sales have halved as compared to last year (Dhanteras).” He said customers “are deferring their decisionmaking since there’s little money in the market.”
A Mumbai-based Honda Cars India Ltd dealer spoke of a similar trend. His dealership sold 100 cars this year on Dhanteras and Diwali days as compared to 200 last year.
Officials at Honda Cars India and Hyundai Motor India Ltd agreed sales were subdued primarily because small traders and businessmen held off making purchases.
“Small businessmen who had been operating without proper bills, etc, are in a state of flux and buying a car is not their priority,” said Jnaneswar Sen, senior vice -president (sales and marketing), at Honda Cars India. He declined to mention the retail sales volumes for Honda. “It has been a mixed bag with retail sales this Diwali and Dhanteras, averaging 10% of retail sales across the country,” said Rakesh Srivastava, director sales and marketing at Hyundai Motor India adding that the sales could have been better if traders/businessmen, who constitute a large share in the sales pie, had not put off purchases.
Veejay Nakra, senior vicepresident (sales and marketing), of Mahindra and Mahindra Ltd, said Diwali and Dhanteras sales this year have been good and “in line with expectations”.
He didn’t comment on specifics, but added, “It would not be right to compare the two periods as Diwali last year fell in month- end and not beginning of this year. The sales are hence marginally lower this year.”
A dealership proprietor who declined to be identified said he feared most dealers of cars and two wheelers would have to get into the inventory correction mode, as the stock build-up has been disproportionate to the actual demand on the ground.
Passenger vehicle sales in India grew 11.32% in September and 13% in August, riding on good growth in the utility vehicles segment and high dispatches ahead of the festive season, according to the Society of Indian Automobile Manufacturers or Siam.
N. Raja, director (sales and marketing), at Toyota Kirloskar Motor Ltd, said the company’s Diwali retail sales grew around 15% because of a healthy order book. The growth, he pointed out, was led by the western region, as some states like Gujarat, which in the pre-GST regime attracted high taxes, have seen net taxes reduce under GST. His firm, he added could have done better but for supply constraints.
“The consumer being not as optimistic as the previous years because of the GST and unnatural rains, funds have been locked in. There’s also a heightened sense of caution,” said Harish H V, partner at Grant Thornton.
Meanwhile, with growth in rural markets returning, it was a season of strong sales for Hero MotoCorp Ltd, which draws close to half its sales from the region. An official at the firm, who declined to be identified, said the company sold a record 3 lakh two wheelers on Dhanteras. The official claimed it’s the highest volume sold by any firm on a single day anywhere in the world.
Officials at Bajaj Auto Ltd and Honda Motorcycle and Scooters India said the company will share Dhanteras sales numbers later in the month.