Passenger vehicle sales drop in June

• Published On: 11 July 2017
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June sales declined by 11 percent thanks to GST-driven stock rationalisation.

Since most carmakers were predicted to drop prices following implementation of GST from July 1, customers in India were cautious in June.

All of June went into stock rationalisation for most manufacturers, especially at the dealer end. A large portion of them were trying to liquidate existing inventory, so as to not carry it forward into July. This can be attributed to the upcoming drop in prices and a clause from the government to credit only the excise duty paid on all vehicles procured before July 1, and not the entire tax and associated cess being subsumed under GST, which is around 6-7 percent in addition of the excise.

Dealers resorted to not placing a high level of fresh orders to automakers, bringing down the June wholesale numbers to 1,98,399 units, a substantial 11.21 percent year-on-year drop. According to Dr Pawan Goenka, managing director, Mahindra & Mahindra, in a GST-related media conference on July 6, "With maximum stocks being liquidated in June, dealers are now sitting on an inventory lower than the industry average of 4-6 weeks. There is a shortage of around a week’s inventory at the dealership level. There should be an inventory refill in the short term, going up to the month of August, after which the stock situation will be back to normal."

The only three carmakers that saw sales growth are Maruti Suzuki India (93,057 units/up 1 percent), Honda Cars India (12,804 units/up 12.25 percent) and Skoda Auto India (1,018 units/up 1.60 percent).

Even Hyundai Motor India saw its sales decline 5.64 percent to 37,562 units while Mahindra & Mahindra saw a drop of 5.27 percent to 16,169 units. Tata Motors faced a drop of 12.19 percent to 13,148 units. Of the 16 automakers, only five logged sales of over 10,000 units last month and two over 5,000 units.