Festival season cheer on hold as auto buyers await GST relief and discounts

Automobile dealers are bracing for a hesitant start to the festival season, with bookings and showroom visits slipping by 25 per cent in the latter half of August. Many customers, they said, are delaying purchases in anticipation of a cut in goods and services tax (GST), prompting some dealers to roll out extra discounts in a bid to draw them in. 

Last Wednesday, members of the Federation of Automobile Dealers Associations (Fada) met Commerce and Industry Minister Piyush Goyal, raising concerns that buyers could postpone purchases until tax changes are confirmed and come into effect. 

The GST Council, meeting for two days from September 3, is expected to consider the plan to cut slabs from four to two: 5 per cent and 18 per cent, with a 40 per cent rate reserved for sin and luxury goods. That would mean GST on many car models falling from 28 per cent to 18 per cent, though a cess could still apply depending on category, size and engine. 

The new structure is expected to take effect sometime in October.

 

While Navaratri festivities are beginning late in September, Diwali is on October 20. 

“We have raised our concerns to the minister that this will affect our sales during this peak season. He assured that the government is aware of the situation and will take appropriate steps,” said C S Vigneshwar, Fada’s president. Dealers say if the government goes ahead with reforms as a Diwali gift, showrooms and companies may sweeten the market further with discounts. 

Festival offers are already running with benefits between ₹1.5 lakh and ₹2 lakh on some models. While details of September’s offers are yet to be announced, dealers and manufacturers say heavy discounting is likely to continue. Any rate rationalisation would provide relief for customers, but could dampen sales in August and September. 

Manufacturers are also playing their part. Tata Motors, under its “Kerala comes together with Tata Motors” campaign, is offering benefits of up to ₹2 lakh across both electric and internal combustion models, alongside priority deliveries for Onam. The company has introduced a suite of financing schemes with lenders: Balloon plans with low initial EMIs -- step-up plans tied to income growth, and EMIs as low as ₹100 per lakh for the first three months. For electric buyers, six-month financing is available on accessories, extended warranty and service. 

Despite these efforts, the usually buoyant Ganesh Chaturthi and Onam season has turned subdued, with sales in some regions down 10–15 per cent. 

According to Kumar Rakesh of BNP Paribas Securities India, there is a likelihood that customers will postpone their purchases over the immediate near-term due to lack of clarity on GST taxation. “This could have an impact on demand during upcoming regional festivals in Maharashtra (Ganesh Chaturthi in August-end) and Kerala (Onam in August-end and September first week). The primary festival season is when the bulk of auto purchases happen in India and it starts from September 22 this year. It would be key to get the revised taxation implemented by then.” 

“Some buyers are holding on to their purchases. It is too early to assess the actual impact. We understand that the government may take suitable actions to address our concerns,” said Sabu Johny, managing director of EVM Motors, which runs a dealership network. 

Following rate revision, Nomura estimates prices could drop by around ₹60,000 for a Maruti Suzuki Wagon R, ₹75,000 for a Maruti Suzuki Baleno, ₹55,000 for a Hyundai Creta, and ₹1.15 lakh for a Mahindra XUV700. 

A Maruti Suzuki dealer in Mumbai said small car buyers were the most sensitive to tax changes. “We are seeing a slight delay in decision-making. However, with festival schemes and easy finance options, we believe sales momentum will pick up in October.” 

A Hero MotoCorp dealer in Mumbai said two-wheeler customers, too, were showing caution, though overall sentiment was steady. “In the two-wheeler segment, price sensitivity is high, so some customers are waiting to see if costs change after GST adjustments.” 

The concerns over August sales follow a weak July. According to Fada, overall auto retail sales fell 4.3 per cent year-on-year, with two-wheeler sales down 6.5 per cent and passenger vehicles slipping nearly 1 per cent. Dealers blamed global trade worries, IT job cuts, and heavy rainfall for weighing on consumer confidence. 

Not all players are witnessing a sales slowdown. A Royal Enfield dealer said demand for motorcycles remained resilient, with festival schemes helping sales. “Demand for our motorcycles continues to remain strong, and festival discounts are helping conversions. Footfall has been steady, and we haven’t noticed people delaying their purchases,” he said. 

Bracing for a rough ride

• Auto dealers met Union minister Piyush Goyal last week and raised concerns over proposed cut in GST rates
• Concerns revolve around customers delaying purchases till new rates come into effect
• Dealers indicate that sales during Ganesh Chaturthi and Onam are down 10–15% in some cases
• OEMs may dole out heavy discounts in September to boost sales
• Nomura expects prices of Maruti Wagon R, Baleno and Hyundai Creta to drop by ₹60,000, ₹75,000 and ₹55,000, respectively

With inputs from Anjali Singh