The weak buying sentiment in the passenger vehicle market got accentuated in August with consumers choosing to hold back purchases on expectations of a cut in goods and services tax. Anticipation of lower rates saw manufacturers go slow on dispatches to dealerships. As a result, passenger vehicle sales slipped 8% yearonyear to 330,259 units, marking the fourth straight month of contraction in wholesale volumes.
The sector’s waitandwatch mood gathered momentum after Prime Minister Narendra Modi last month spoke about rationalising GST rates to stimulate consumption. The current levy of 28% on cars and SUVs is widely expected to be reduced to 18%, a move that could alter affordability and rekindle demand.
Manufacturers indicated that they deliberately trimmed supplies to avoid saddling their dealers with highcost inventory that could turn uncompetitive once the new tax rates are notified. “With the final GST announcement approaching, we consciously decided to bring down the wholesale billing to minimise the stock being carried by our dealers. We look forward to the GST rationalisation, which would be a demand driver through the festive season,” Nalinikanth Gollagunta, CEO of Mahindra & Mahindra’s automotive division, said.
This strategy, however, had immediate consequences on company rankings. M&M, which has been among the top three in recent months, slipped to the fourth position after reporting 39,399 units in August, a 9% decline from a year ago.
Market leader Maruti Suzuki also saw an 8% contraction in volumes, with dispatches falling to 131,278 units. The pressure came largely from its utility vehicles such as Brezza, Grand Vitara and Ertiga, along with entrylevel hatchbacks like Alto and SPresso.
Hyundai Motor India, despite regaining the second spot, suffered the sharpest drop among the top players. Its volumes shrank 11% yearonyear to 44,001 units, weighed down by slower movement of the Creta and i20. Tata Motors followed closely, recording sales of 41,001 units, down 7%. Interestingly, its electric vehicle portfolio, which now contributes a fifth of total sales, surged 44% as buyers advanced purchases on speculation that EVs might face higher GST in future.
That same expectation helped JSW MG Motor India lift volumes by 52% to 6,578 units, making it the fastestgrowing player in the segment and consolidating its position as the secondlargest EV maker after Tata Motors.
The coming festive season, beginning with Navratri later this month, is being seen as the true test of demand revival. Car makers are cautiously optimistic but remain unwilling to commit on dispatch levels until the government’s decision on GST rates is clear. “There is no clarity about the date from when the revised GST rates would be applied. On the basis of that, supplies in September would be decided,” said a senior executive of a Delhibased manufacturer.
Brokerage Nuvama noted that the industry’s slowdown was squarely linked to postponed buying decisions triggered by the likely tax cut. It added that discounting has risen across Hyundai, M&M and Tata Motors, though Maruti Suzuki’s incentives remain more restrained.
