Minimum inventory sees car sales plummet in June

Companies' sales to dealers decline ten per cent

A reduction in dispatches by car makers to ensure minimum inventory at dealerships in the run up to Goods and Services Tax has resulted in a double-digit decline in wholesale of passenger vehicles (cars, vans and utility vehicles) in June. The industry volume is estimated to have declined by about ten per cent. Most companies including Hyundai, M&M, Tata Motors have seen a decline. Based on data from nine companies, the industry is estimated to have sold about 190,000 vehicles last month, a decline of over ten per cent from June last year.

Country’s biggest car maker Maruti Suzuki reported a growth of one per cent in June domestic sales. The company sold 93,057 units against 92,133 units in June last year. The flat performance after months of strong growth is on account of a week-long maintenance shutdown at its two plants last month. Reduction in dealer inventory to has added to its woes. Under GST rules, dealers cannot claim hundred per cent input tax credit on taxes paid on the vehicles that came in their inventory till June 30.  

Hyundai, the second largest car maker in the country, reported domestic sales of 37,562 units in June, down 5.6 per cent over the corresponding month last year. Rakesh Srivastava, director (sales and marketing) said the month of June was challenging due to ‘speculations’ on the GST. “We expect a positive demand pull post the successful implementation of GST in the coming months,” he said.

SUV maker M&M reported a five per cent decline in June sales to 16,170 vehicles. “Our focus has been to minimise channel stocks to reduce the transition losses on account of GST implementation. We strongly believe that once we tide over the initial uncertainties, GST is set to usher in a new era for the economy in general and the automotive industry in particular,” said Rajan Wadhera, president (Automotive Sector) at M&M.

Companies like Tata Motors, Renault, Nissan and Ford did not announce their numbers on Saturday. But all of them are learnt to have posted a double digit decline in sales. Toyota dispatched only 1,973 vehicles to dealers against 13,567 units in June last year. N Raja, director and senior vice-president (sales & marketing) at Toyota said a conscious decision was taken to lower the volumes sold to dealers last month to ensure minimum burden on them while allowing them to focus on clearing the stocks.  “We have started billing with GST rates from today. July should be clearly a better month,” he said.

 July, however, is expected to be a strong growth month. Car makers have reduced prices by up to three per cent to pass on the benefit of GST.  “A focus on stock clearance pushed car makers to slow down dispatches. We expect a very strong bounce back in July,” said Amit Kaushik, Managing Director for Detroit-based automobile consultancy Urban Science in India.