GST Impact On Auto Sector: Passenger Vehicle Sales In June Affected

The Goods and Services tax came into effect in India on the 1st of July 2017 and there was a lot of anticipation as to how the automotive industry would react to this. While we've already told you about the changes in price of four-wheelers, we've also told you how the industry has reacted to this new taxation rate. Many automotive companies like Hyundai, Mahindra, BMW, Mercedes-Benz and even Jaguar had announced special offers on their cars calling it the pre-GST discount, and while one might think that this would have worked, the June sales tell a different tale.

Maruti Suzuki India posted just a 1.2 per cent rise in domestic sales in June. Maruti's drop in June sales is across the board, not just in the larger car. The compacts that dominate Maruti's sales charts - Swift, Celerio, Ignis, Baleno and Dzire have seen a month-on-month drop of 26%. Even year-on-year this space sees Maruti sales down 3.5% over June 2016. Utility vehicles like the Ertiga, S-Cross and Vitara Brezza, saw sales rise by 43 per cent to 13,879 units in June, from 9,708 in the same period last year. The company has already announced a 3 per cent cut in prices and the effects of this might soon reflect in the July sales.

While Maruti Suzuki has seen a rise in sales, rivals Hyundai, Tata Motors and Mahindra reported decline during the month impacted by speculations over GST tax structure. As compared to June 2016 (39,807 units), Hyundai India only sold 37,562 units, which is a drop of 5.6 per cent. Compared to May 2017 though, which registered a total sales figure of 42,007 units, the drop in sales for June is even higher at 10.58 per cent. The drop in sales can be directly attributed to the uncertainly that GST would have brought to the minds of perspective buyers as tax rates have now been cut and cars have become cheaper. The company expects a positive demand pull, post successful implementation of GST, in the coming months.

Tata Motors said that sales saw a marginal drop of 9 per cent in overall volumes for the month of June 2017 due to the pre-GST sentiment. In a statement, the company said that mixed consumer sentiments towards the implications of GST impacted the passenger vehicle business sales which dropped by 10 per cent, even though the company's commercial vehicles business grew on a month-on-month basis. The company sold a total of 40,358 vehicles (passenger and commercial) last month, 9 per cent lower than the 44,525 vehicles that were sold in June 2016.

Utility vehicle major Mahindra & Mahindra also reported 3 per cent decline in domestic sales at 33,861 units last month. Exports of the car maker were down 54 per cent at 1,855 units in June against 4,020 units in the same month last year. Sales of passenger vehicles, including Scorpio, XUV500, Xylo, Bolero and Verito, declined 5 per cent at 16,170 units compared to 17,070 units in the same month last year. Just like Tata Motors commercial vehicle sales were up by 12 per cent at 15,131 units in June against 13,538 units in the year-ago period.