Automobile sales rose in July as vehicle makers cut prices and dealers rebuilt inventory after holding off purchases in the run-up to the Goods and Services Tax.
India’s largest passenger vehicle maker Maruti Suzuki India Ltd.’s sales grew 20.6 percent year-on-year in July and second-placed Hyundai Motor India Ltd. stemmed multi-month decline to report a 4.4 percent rise.
Hero MotoCorp Ltd., the country’s biggest two-wheeler maker, reported a 17 percent jump in sales. Its erstwhile partner Honda Motorcycle and Scooter India Ltd. saw its total sales rise 20 percent during the month.
Dealers had reduced inventory ahead of GST fearing losses on existing stock as the effective tax rates fell under the new indirect tax regime. Levy on most vehicles, barring motorcycles with engine capacity of over 350cc and hybrid vehicles, came down under GST. Maruti Suzuki and Honda Cars India Ltd. had promised to compensate dealers’ losses.
“While it would be difficult to calculate the exact contribution, a large part of the rise in July sales would have been because of an inventory build-up after the GST rollout,” said Kumar Kandaswamy, senior director at Deloitte Touche Tohmatsu India, an automobile sector expert.
A rise in sales was not limited to market leaders as Honda Cars reported a jump of 22 percent. Tata Motors Ltd.’s sales rose 7 percent despite a 36 percent fall in its exports.
Tata Motors, India’s largest truck maker, sold 15 percent more commercial vehicles while rival Ashok Leyland Ltd. posted a 14 percent growth.
Apart from dealers building up their inventory, the months leading up to the GST rollout would have also seen buyers postponing their purchase, waiting for prices to be reduced.Kumar Kandaswamy, Senior Director, Deloitte Touche Tohmatsu India
A good monsoon is expected to boost rural demand, but it typically comes with a lag of four-five months. Also, sales jump during the August-December festive season, which partly explains the demand from dealers.
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