Auto sales con­tinue to skid as in­dus­try faces head­winds

Play­ers seek govt sup­port to get back on track

The Hindu Business Line - - NEWS - MIRZA MO­HAMMED ALI KHAN

The down­ward spi­ral in au­to­mo­bile sales con­tin­ued in May 2019 as slack re­tail off­take forced man­u­fac­tur­ers to cut pro­duc­tion in or­der to ad­just to mar­ket de­mand.

Data from the So­ci­ety of In­dian Au­to­mo­bile Man­u­fac­tur­ers (SIAM) re­leased on Tues­day re­vealed a de­crease of 8.62 per cent in to­tal do­mes­tic sales com­pared to fig­ures from May 2018.

The slump was recorded across al­most all au­to­mo­bile types, with pas­sen­ger car sales de­clin­ing by a sig­nif­i­cant 26.03 per cent. In May 2019, 1,47,546 pas­sen­ger cars were sold. The to­tal pas­sen­ger ve­hi­cle sales, in­clud­ing vans and util­ity ve­hi­cles, de­clined by 20.55 per cent, with a to­tal of 2,39,347 units sold.

Even two-wheeler sales fell, as the world’s largest twowheeler mar­ket faced head­winds in the form of in­creased in­sur­ance rates and un­cer­tainty ahead of the BS-VI reg­u­la­tions that will kick-in next year.

To­tal two-wheel­ers sales de­clined by 6.73 per cent com­pared to May last year, as scooter sales fell by 7.87 per cent and mo­tor­cy­cle sales de­clined by 4.89 per cent.

‘Un­prece­dented’ de­cline

SIAM termed this con­tin­u­ous de­cline un­prece­dented. “We had an­tic­i­pated that be­fore the Bud­get, the in­dus­try will not be able to turn around. But if you look at the sever­ity of the drop, that is some­thing which is both­er­ing us,” Su­gato Sen, Deputy Direc­tor Gen­eral, SIAM, told Busi­nessLine.

Sen fur­ther added that apart from one month see­ing an uptick in the past 11 months, sales have been on a con­tin­u­ous de­cline.

While an­a­lysts and in­dus­try ex­perts have at­trib­uted a va­ri­ety of rea­sons for the slump, in­clud­ing the Gen­eral Elec­tions, they are of the opin­ion that these fac­tors need to be stud­ied in a much more de­tailed man­ner. “We used to look for­ward to elec­tions — for sale of util­ity ve­hi­cles, two-wheel­ers — this time, all cat­e­gories of ve­hi­cles are down,” Sen elab­o­rated. Other in­dus­try ex­perts said that a pos­si­ble rea­son be­hind re­duced au­to­mo­bile sales could be im­prov­ing pub­lic trans­port fa­cil­i­ties, such as bet­ter metro con­nec­tiv­ity in some cities.

“Dwin­dling sales in pas­sen­ger cars show no signs of rebounding yet due to var­i­ous fac­tors such as dry­ing up of fi­nanc­ing re­sources with the NBFC trou­bles, elec­tion-re­lated im­passe, high base num­ber and BS-VI ex­pec­ta­tions in a cou­ple of quar­ters. Many OEMs have plans afoot in cut­ting back pro­duc­tion to re­duce the in­ven­tory pile-up with deal­ers. The seg­ment is hop­ing for the Bud­get to throw some en­cour­ag­ing news,” Srid­har V, Part­ner, Grant Thorn­ton In­dia, said.

Man­u­fac­tur­ers such as Mahin­dra & Mahin­dra and Maruti Suzuki have cut pro­duc­tion.

Pin­ning hopes on Bud­get

SIAM and the auto-mak­ers are now look­ing at the Bud­get with hope. “This is some­thing which needs se­ri­ous in­ter­ven­tion from the gov­ern­ment so that the mar­ket starts be­hav­ing in a pos­i­tive man­ner,” said Sen. “We also had re­quested the Min­istry of Heavy In­dus­tries, which is our par­ent min­istry, to take it up with the Min­istry of Fi­nance and we hope they sup­port us,” he added.

Bud­get so­lu­tions in the form of tax relief is an im­por­tant as­pect. “We have re­quested that the high­est rate of 28 per cent (GST) should not be levied for all cat­e­gories of auto in­dus­try. In fact, the en­tire 28 per cent cat­e­gory should be re­moved and should come down to 18 per cent,” he added. Sen was also of the opin­ion that cess needs to be mod­er­ated.

In the medium-term, the BSVI regime be­gin­ning from April 2020 could have an ef­fect, as ve­hi­cle costs are set to in­crease. “With BS-VI, diesel car costs will go up sig­nif­i­cantly. Petrol car costs will not go up so sig­nif­i­cantly,” Sen said.

With re­gard to two-wheeler sales, Sen was op­ti­mistic as he ex­pected peo­ple to con­tinue buying them. How­ever, he said the sec­tor may not see a straight-line growth but some ups and downs, thanks to cost fac­tors.

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