PV sales decline 7% in August as buyers await GST rate cut decision

Domestic passenger vehicle sales dropped 7.3% in August to 330,000 units as buyers and automakers awaited GST Council reforms, with Maruti Suzuki and M&M reporting weaker volumes

Domestic passenger-vehicle (PV) sales by companies to dealers dropped 7.3 per cent year-on-year (Y-o-Y) in August to around 330,000 units, primarily due to customers waiting for a decision by the Goods and Services Tax (GST) Council on September 4 on decreasing the tax on automobiles from 28 per cent to 18 per cent.

 

Maruti Suzuki India Ltd (MSIL), India’s largest carmaker, recorded a drop of 7.5 per cent Y-o-Y to 144,145 units.

 

Partho Banerjee, senior executive officer (marketing and sales), said in August the company calibrated its dispatches in accordance with demand from consumers. “Till August 15, there was good traction in terms of bookings,” he said in a press conference.

   

In his Independence Day address, Prime Minister Narendra Modi had announced the GST structure would be streamlined with just two main tax slabs (5 per cent and 18 per cent) plus a higher bracket (of 40 per cent) for luxury or harmful items. This will effectively replace the four-tier structure currently in place. 

 

The GST Council will hold its meeting on September 3 and 4 on rate rationalisation. Automobiles come under 28 per cent and are expected to go to 18 per cent slab.

 

“Once GST reforms are announced, we expect good sales,” Banerjee noted. 

 

He said in August last year domestic PV sales stood at 356,113 units. In August this year they dropped to about 330,000 units, plus or minus 5,000 units, he added. Many automobile companies, he said, took a conscious decision in August to not push vehicles to their dealers.

 

“We should not read too much into dispatches this month (in August). The real picture about demand will become clear once the GST rate is rationalised. Bookings are still very good. People continue to come to our showrooms,” he noted.

 

Saket Mehra, partner, Grant Thornton Bharat, stated while anticipation on GST was a key factor behind the slowdown, this trend was not limited to the auto sector.

 

“Similar patterns are being observed in consumer durables, where categories like air conditioners and refrigerators — currently taxed at 28 per cent — have seen reduced footfalls on major ecommerce platforms. Consumers across multiple discretionary spending sectors appear to be deferring high-value purchases in anticipation of price corrections,” he added.

 

In the auto sector specifically, seasonal factors such as the monsoon have also contributed to a temporary dip in rural demand, particularly for entry-level and utility vehicles.

 

“At the same time, many original equipment manufacturers (OEMs) have continued to push dispatches aggressively, leading to elevated inventory levels at dealerships. This has increased working capital pressure on dealer partners and underscores the need for better alignment between supply and actual retail demand. A more agile and collaborative supply-chain approach between OEMs and dealers will be critical to maintaining financial health across the ecosystem,” Mehra added.

 

Domestic sales of Mahindra & Mahindra dropped 9 per cent Y-o-Y to 39,399 units in August.

 

Nalinikanth Gollagunta, chief executive officer (automotive division), said: “With the final GST announcement approaching, we decided to bring down wholesale billing to minimise the stock being carried by our dealers. We look forward to GST rationalisation, which would be a demand driver through the festive season.”

 

In two-wheelers, Bajaj Auto and Honda Motorcycle and Scooter India (HMSI) recorded a drop in August.

 

For TVS Motors, domestic two-wheeler sales increased 28 per cent Y-o-Y to 368,862 units.