Passenger vehicle sales decline 11% in June

Sales of commercial vehicles grew by just 1.44%, while three-wheelers declined almost 25%

Domestic automobile sales saw a muted growth of one per cent in June as the passenger vehicle (cars, utility vehicles and vans) segment declined more than 11 per cent. A four per cent growth in two-wheelers, however, helped the industry remain in the green. Sales of commercial vehicles grew by just 1.44 per cent, while three-wheelers declined almost 25 per cent.

Data from Society of Indian Automobile Manufacturers (Siam), which captures wholesales of companies to dealers, shows the passenger vehicle makers dispatched 198,399 units in June, about 11 per cent lower to the volumes in corresponding month last year. This was the first decline in six months. But June happens to be an exceptional month as the industry prepared for the roll-out of the goods and services tax (GST) from July 1. 

Wholesales declined last month as dealers were not making fresh purchases. The government had clarified it would give 100 per cent input tax credit on excise duty and not on cesses, which together amount to 5-6 per cent of the cost of a vehicle. Dealers accordingly focused on selling existing stocks with them to prevent losses, said Vishnu Mathur, director-general, Siam. 

Passenger vehicle sales had recovered from January after being hit during November-December (owing to demonetisation). The decline in June was the steepest fall in 51 months, since March 2013, when sales fell by 13.01 per cent. Most players, including Hyundai, Mahindra & Mahindra, Toyota and Tata Motors, reported a decline. Market leader Maruti Suzuki clocked a growth of one per cent. Siam has not yet revised its FY18 forecast for passenger vehicle sales. It had projected a growth of 7-9 per cent.

Two-wheelers, the largest automobile segment by volume, saw sales expand four per cent to 1.52 million units in June. Sales of scooters grew over 10 per cent to 497,478 units, while motorcycles grew over 2 per cent to 964,269 units. “Rise in rural income and prospects of a good monsoon are driving motorcycle sales,” said Sugato Sen, deputy director- general, Siam. 

Three-wheelers (auto rickshaws) have been weak since demonetisation and sales declined 25 per cent in June to 36,491 units. Commercial vehicles also saw a muted performance and grew at just 1.44 per cent. Within this segment, light commercial vehicles grew by 7 per cent to 35,715 units, while medium and heavy commercial vehicles registered a drop of over 6 per cent to 21,175 vehicles. 

Experts see a growth ahead for the industry. “We expect the Indian automotive market to witness growth in several pockets in FY18, driven by a good monsoon, lower interest rates, strong rural economy and smooth implementation of the GST pushing automakers to offer price cuts on vehicles,” said Rakesh Batra, partner and leader (automotive) at EY India.