Festive demand, tax cut power auto sales in September
Maruti Suzuki, Tata Motors, Mahindra and TVS Motor credited festive buying and the reduction in tax rates as prime reasons for the sales surge. For most small cars, GST was cut from 28% to 18%, and from 45-50% to a flat 40% for large SUVs last month.
Powered by tax cuts and festive spirits, automobile sales took off in September, cheering manufacturers across the board.
Tata Motors Ltd, Mahindra and Mahindra Ltd and Maruti Suzuki India Ltd reported their best monthly numbers, while Hyundai's top-selling SUV Creta saw its highest monthly sales. Two-wheeler makers Bajaj Auto Ltd and Hero MotoCorp Ltd saw just 5% annual growth in domestic sales, while TVS Motor Co. reported a 12% jump.
Retail car sales broadly rose 10%, with Tata Motors seeing the highest sales growth of 45%. However, Mahindra and Maruti also highlighted problems due to the limited availability of trailers to ship cars from factories to dealerships. Due to logistics constraints, Maruti saw its wholesale dispatches fall by 8% to 135,711.
Maruti Suzuki, Tata Motors, Mahindra and TVS Motor credited festive buying and the reduction in tax rates as the prime reasons for the sales surge. For most small cars, goods and services tax (GST) was cut from 28% to 18%, and from 45-50% to a flat 40% for large SUVs after the GST council approved the tax cut last month.
While both Tata and Mahindra saw a surge in wholesale dispatches with their best monthly sales at 59,667 and 56,233, Maruti recorded its best retail sales of 173,500 cars, up 27.5% from a year earlier.
Hyundai’s wholesale sales in India remained muted at 51,547, with only 1% growth compared to sales last September. However, its best-selling SUV Creta recorded the highest ever monthly sales of 18,861 units.
“The combination of the festive spirit and the new GST benefits has led to a sharp rise in bookings and enquiries. Showroom and dealership footfalls have more than doubled compared to the festive season last year," Hero MotoCorp said. “The GST cut has led to a good festive season. We are working round the clock to ensure availability of our cars. Our inventories have now come down to just about a month," Maruti Suzuki's marketing head Partho Banerjee said.
Tata Motors managing director and chief executive officer (CEO) Shailesh Chandra said the GST cut and festive season together helped the carmaker beat both Hyundai and Mahindra to rise to become the second largest carmaker this year. All three have been locked in an intense competition for the second position.
“Across our portfolio, customer interest remained exceptionally strong with new bookings doubling in the latter half of September following the lowering of GST rates," Chandra said on the sales performance of the company, which saw sales grow by 45% to 59,667 units.
Mahindra and Mahindra also saw a 10% surge in sales to 56,233 units during September. However, it flagged the logistics issue as a key concern.
“The surge in festive demand has placed significant constraints on the availability of trailers. We are working to improve dispatches to our dealer network within the constraints," Nalinikanth Gollagunta, CEO, automotive division at M&M, said.
Part of the reason attributed by industry executives for record sales is also the fact that consumers held back purchases in August after Prime Minister Narendra Modi announced the tax in his Independence Day speech.
The tax cut has raised hopes that the industry will see growth above 1-2% predicted at the start of the financial year. All carmakers expect this festive season to deliver good growth.
Ashim Sharma, senior partner at Nomura Research Institute, said the surge in numbers is mainly the result of the festive season and customers delaying purchases in August in anticipation of tax cuts. "The GST cut will fundamentally result in good growth in sales of segments like small cars. This surge will last for a short period before numbers temper. However, we can see good baseline growth in the coming quarters," Sharma said.
On Wednesday, the Nifty Auto index rose 0.85%, against a 0.92% rise in benchmark Nifty. Tata Motors shares surged the most by 5.6%, while Maruti shares fell by 0.37%. Maruti’s sales figures were announced after market hours. Hyundai gained 0.23% and Mahindra 1.21%.
Analysts noted that their checks with dealers across the country suggest that automobile companies were expected to retain the sales momentum.
“Demand improvement is expected due to benefits of GST cuts, improvement in entry-level demand and the inventory build-up with dealers," analysts at Nuvama Institutional Equities said in a note on 29 September.
topics
