PV production fell 4.1% in August as OEMs cut dispatches to dealers

Passenger vehicle production and dispatches fell in August as demand weakened after GST 2.0, while two- and three-wheeler sales recorded strong growth, led by scooters and SUVs

Passenger vehicle (PV) production in India fell by 4.1 per cent in August as dispatches by original equipment manufacturers (OEMs) to dealers declined by almost 9 per cent. OEMs recalibrated their dispatches to dealers as demand fell sharply after the goods and services tax (GST) 2.0 announcement around mid-August.

 

As consumers held back their purchase decisions in anticipation of price cuts, the retail of PV suffered in several dealerships, pushing inventory days to 60 and an overall channel inventory of around 600,000 units at the end of August. OEMs, thus, recalibrated their dispatches to dealers, with major companies like Maruti Suzuki India reporting an over 8 per cent decline in dispatches. Mahindra & Mahindra (M&M) saw an over 9 per cent fall in dispatches while Hyundai Motor India’s dispatches fell by around 10 per cent.

 

Rajesh Menon, director general of the Society of Indian Automobile Manufacturers (Siam), said that sales of PVs in August declined by 8.8 per cent to 322,000 units, as compared to the same month last year primarily due to recalibration of dispatches by PV manufacturers.

 

While overall PV production fell by 4 per cent, the passenger car segment saw a 7.9 per cent drop (125,000 units). Utility vehicle sales fell by 1.8 per cent in contrast. However, despite production cuts, exports have grown by 24.6 per cent for the PV segment.

 

As such OEMs like Hyundai feel that the biggest beneficiary of the GST cut would be the small sports utility vehicle (SUV) segment comprising models under 4 metres in length. 

 

Tarun Garg, chief operating officer (COO) of Hyundai Motor India, said last week that the small SUV segment is already the biggest segment in the car industry. GST rate rationalisation, coupled with the 8th pay commission recommendations, and the rising customer aspirations, could give a huge demand boost. Small SUVs currently account for about 30 per cent of the industry’s overall PV sales. “The small SUV segment could see the maximum growth," he told reporters.

 

Meanwhile, Maruti expects that small car sales growth will be around 10 per cent from 2026-27 (FY27) onwards.

 

Two- and three-wheelers zoomed in August as PVs struggled

 

Two-wheeler sales were a bright spot – growing by 7.1 per cent – with dispatches of 1.83 million units in August. Scooters have led the growth within the segment, posting a strong 12.7 per cent, while motorcycles grew by 4.3 per cent to 1.1 million units. Siam data showed that players like Ather had an almost 70 per cent jump in dispatches to 22,757 units. Hero MotoCorp too saw a 5.4 per cent rise in dispatches while Royal Enfield saw a strong 56 per cent jump.

 

GST on motorcycles whose engines are above the capacity of 350 cc has been increased to 40 per cent as against 31 per cent now (including cess). This has led to rise in sales in 350 cc+ category and the trend is likely to continue till September 22, when the new GST structure becomes effective. Dealers say that footfalls and enquiries before the festive season remained steady, and after the rains reduce, they expect better footfalls closer to the festive days.

 

Three-wheelers, in fact, posted their highest ever August sales at 76,000 units, a jump of 8.3 per cent compared to last August.