Home >industry >banking >Auto sales pick up in July as dealers build stocks ahead of festive season

Car and two-wheeler sales advanced at a brisk pace in July as manufacturers dispatched more vehicles to their dealers to build stocks after the goods and services tax (GST) came into force on 1 July.

Car market leader Maruti Suzuki India Ltd’s domestic sales rose 22.4% to 154,001 units in the month from a year ago, the company said on Tuesday. A 25.3% increase in sales of compact models, including the Swift, Ritz and Baleno, led the sales growth. Driven by the popularity of the Brezza, sales of utility vehicles advanced 48.3% to 25,781 units in July.

Indian car- and two-wheeler makers count dispatches to dealers as sales. Sales to end-consumers, which are not tracked by companies or the industry lobby group Society of Indian Automobile Manufacturers, may have actually slowed, according to an official at the Federation of Automobile Dealers Associations, a grouping of dealers. This person, who asked not to be identified, said buyers put purchases on hold because dealers cut back on discounts they had offered in May and June to push sales ahead of the move to GST.

The first few weeks after the 1 July launch of GST saw almost no sales, a dealer in high-end cars said on condition of anonymity.

Still, companies and dealers are building up stocks ahead of the festive season—the period beginning September and ending December that many Indians consider auspicious for purchases of consumer durables including cars and bikes. Normal monsoon rain, which should stimulate rural demand, and an anticipated interest rate cut by the Reserve Bank of India on Wednesday are also expected to spur sales.

“We expect strong demand for automobiles with the normal monsoon this year and expectations of another rate cut," said Shrikant Akolkar, an analyst at Angel Broking.

In July, sales at Hyundai Motor India Ltd, the second largest car maker by sales, rose 4% to 43,007 units from a year ago. Rakesh Srivastava, director of sales and marketing, said a drop in prices after the implementation of GST helped boost sales.

Ahead of the rollout of GST, companies curtailed dispatches to dealers to minimize losses on account of transition to the new indirect tax regime. Passenger vehicles sales in June declined 11.2%, the sharpest fall since March 2013, as dealers stayed away from buying stock because of GST-related ambiguities.

The cut in prices, a “healthy monsoon" and the impending “onset of the festive season" will help sales increase, Yoichiro Ueno, president and chief executive at Honda Cars India Ltd, said in a statement. Sales at Honda Cars rose 22% to 17,085 units in July.

Passenger vehicles sales at Mahindra and Mahindra Ltd rose 21% to 20,962 units.

Most two-wheeler makers also reported sales increases in July. Sales at Honda Motorcycle and Scooter India Pvt. Ltd rose 19% to 511,939 units from a year ago. TVS Motor Co. said its monthly sales rose 6% to 219,396 units.

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