New Delhi: Passenger vehicle segment sales in November grew the fastest since July on the back of a low base effect caused due to last year’s demonetisation exercise. Total passenger vehicle sales grew 14.29% to 2.75 lakh units during the month, helped by a 44.6% rise in utility vehicle sales. Dispatches in the passenger car segment, however, increased by just 4.4% to 1.81 lakh units.

The Society of Indian Automobile Manufacturers (Siam) maintained that the low base impact will continue to benefit auto makers in the next couple of months till January.

“Going forward December and onwards will see a continuation of this base effect. Also almost all the car makers are offering huge discounts as well which will also help attract potential customers," said Sugato Sen, deputy director general, Siam.

Siam reports the wholesale numbers that companies push into the dealerships and not the ones billed to the customers.

Overall the industry body expects sales across segments to meet the projections made at the beginning of the fiscal.

“We expect the automobile industry to beat projections across segments especially in the commercial vehicles" added Sen.

According to Vishnu Mathur, director general at Siam, the automobile industry is expected to increase its overall volumes by 8-10% during this fiscal.

Corporate sales, which constitute 35-40% of total passenger vehicle sales, took a hit after the introduction of GST. Small and medium-sized companies had to invest in compliance related issues and refrained from increasing their expenses further since overall demand outlook was subdued.

“We also expect 99% of the GST related problems to be solved within a year of its introduction," Mathur said.

In the last four to five quarters, most automobile manufacturers experienced pressure on operating margins due to increases in raw material prices, especially steel and rubber. Going forward, due to the benefit of the input tax credit, auto makers will be able to get some relief on this front which will boost operating margins.

“We expect the raw material cost of the manufacturers to come down since under the GST they can avail the input tax credit which will be beneficial. So, GST will have a very positive impact on the overall automobile industry," added Mathur.

The two-wheeler segment, which has been under pressure during the last fiscal because of the impact of demonetisation and ban on the sales of BS III vehicles by the Supreme Court, saw a 23.49% increase in sales to 1.5 million units in November, helped largely by a good monsoon and a healthy harvest season.

Sales of scooters increased by 30.2% to half a million units. Most of the growth in the motorcycles segment has been because of the good monsoon, which led to a revival in the demand for economy and executive segment motorcycles, another Siam executive said.

“Good monsoons and high uptake of vehicles in the rural market and semi urban markets have translated to healthy growth in vehicle sales this year," said Sen.

“The performance of the OEMs across categories will also have to be seen in the light of the performance in November 2016, a low base at the back of demonetisation. Having said that, OEMs have still shown growth which is closer to the highest average monthly sales in the previous financial year," said Sridhar V, partner, Grant Thorton India LLP.

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