Full throttle: Car sales surge 15% in race to pass on GST sops

Up 15% after June slack as automakers replenish stocks at dealerships

Domestic sales of passenger vehicles (cars, vans and utility vehicles) expanded at more than 15 per cent in July — the highest pace in the first seven months of this calendar year. This growth, however, comes after a double-digit decline of 11 per cent in June, when companies regulated sales to reduce dealers’ loss on pre-goods and services tax (GST) inventory. Six leading companies, including Maruti Suzuki, Mahindra & Mahindra (M&M), Honda and Toyota, recorded high double-digit growth, as they replenished the inventory at dealerships.

The country’s biggest carmaker, Maruti Suzuki, has sold a record monthly volume of 153,298 vehicles in the domestic market during July, growing 22 per cent over last year. Maruti, the country’s most valued automobile company, made a new record at the bourses, with its stock hitting a fresh high of Rs 7,920 in Tuesday’s trade. It closed at Rs 7,859, up almost 2 per cent from the previous day. All vehicle segments, except vans, recorded double-digit growth for the company.

The industry is unlikely to sustain this high growth in August. This is because retail sales have not been strong in July.

Buyers advanced purchases in June to take advantage of the deep discounts and offers rolled out by companies and dealers to clear pre-GST inventory.

R S Kalsi, executive director (marketing & sales) at Maruti Suzuki, said recently that the performance of June and July should not be seen in isolation. Korean carmaker Hyundai, the second biggest player, reported a growth of about 4 per cent in July to sell 43,007 units. The lowering of prices on account of GST implementation and good monsoon will increase customer confidence and sentiment towards vehicle buying, said Rakesh Srivastava, director (sales & marketing), Hyundai.

Sport utility vehicle (SUV) major M&M has clocked a 21 per cent growth to sell 20,962 units in the domestic market. Rajan Wadhera, president-automotive sector, M&M, said, “The benefit of a good monsoon, the successful roll-out of GST and a good run up to the festive season, starting from August, give us the confidence of continuing a robust growth in the second quarter.”

Japanese carmaker Toyota sold 17,758 vehicles last month, growing 43 per cent over July 2016. N Raja, director and senior vice-president (sales & marketing) at Toyota, said a conscious decision was taken to lower the volumes sold to dealers in June and therefore, its July sales are strong. “Customers were waiting to take advantage of a price cut after GST. Innova buyers now need to pay Rs 1 lakh lower, while Fortuner buyers have to shell out Rs 2 lakh less. Both these command a waiting period.” Its Japanese peer Honda clocked a volume growth of 22 per cent in July and sold 17,085 vehicles in the domestic market.

Tata Motors reported a 10 per cent growth in July passenger vehicle sales to 14,933 units last month. Mayank Pareek, president of the company’s passenger vehicle business, said the company maintains a ‘cautious optimism’ and will work towards turning around the business. American carmaker Ford reported a 19 per cent growth in sales. Two companies — Renault and Nissan - are learnt to have seen a decline in sales last month. Both did not announce the sales data, but Renault is said to have seen a 25 per cent drop in sales to 8,949 units, while Nissan’s numbers are down by 32 per cent to 4,360 units. 

All companies have cut prices of cars after GST to pass on the benefit of a lower tax burden. The prices of small cars have come down by 1-2 per cent, while SUVs and luxury cars have turned cheaper by up to 10 per cent. Companies are hopeful the price cuts will expand the fifth biggest car market.