GST impact: Car exports growth at 6-year low

Indian car exports, which expanded by 16 per cent last year, have grown at a low single digit of 2.62 per cent in the first five months of FY18. This is the lowest rate of growth in the last six years as players like Hyundai are facing challenges in the export market.

Data from the Society of Indian Automobile Manufacturers show that export of passenger vehicles (cars, utility vehicles and vans) from India has expanded by just 2.62 per cent during the April-August period of the current financial year to 303,801 units. In the corresponding period of FY17, exports had grown by 13.47 per cent to 296,148 vehicles.

Exports had grown at 12 per cent during the April-July period this year. However, a sharp decline of 25 per cent in August has softened the growth rate to a low single digit. Almost all leading players like Ford, Hyundai, Volkswagen and Nissan posted a double-digit decline in shipments last month.  

Ford, which recently emerged as the biggest exporter after overtaking Hyundai, saw a 55 per cent dip in exports last month to 7,963 vehicles. “We had a supplier related issue specific to transmission which impacted domestic as well as exports in August. The same is getting normalised and is not yet to optimum standards. We would not be able to share the details of the September shipment in advance,” said a company spokesperson. As things stand, the company may post a decline in September as well.

Korean car maker Hyundai saw shipments decline by 22 per cent last month to 12,802 units. The company, which is also the second biggest car maker in the domestic market, has said it is bringing down exports to cater domestic demand in the backdrop of capacity constraints. Like Hyundai, Nissan is also seeing declining exports. In August, it saw a decline of over 24 per cent while April-August volume is down 31 per cent to 25,809 vehicles.

German car maker Volkswagen did not respond to queries on the export decline in August when volumes contracted by 14 per cent to 6,469 units. Some impact on exports could also have come post introduction of GST from July as companies are required to block funds for payment of cess while undertaking exports.

  

Exporters have the option of shipping cars without paying a GST or cess against a bond or letter of undertaking but this is seen as a complicated process. Most companies, therefore, prefer to pay GST out of the input tax credit pool and claim a refund later. The challenge has come from the cess part, which in this case should be paid in cash. This cess is as high as 28 per cent in case of SUVs and at 17 per cent for mid-sized cars. Getting a refund could take a few months resulting in cash flow problems for the exporter.