New Delhi: Passenger vehicle sales data of top six car makers, which account for 90 per cent market share in the country, registered a steep decline, triggering renewed calls for tax sops and a slash in forecasts.
The expected overall sales decline in August – which is estimated at 34 per cent - compared to same period a year ago, would be the tenth straight fall.
Data from Tata Motors and Mahindra & Mahindra, which together account for about two-thirds of the commercial vehicles market, show that sales of trucks, a key indicator of economic activity, fell by almost 40 per cent.
Industry executives are renewing calls for a tax cut on cars, two-wheelers and trucks while auto analysts are slashing their sales forecasts for the year.
The crisis in the auto sector is a huge problem for Prime Minister Narendra Modi's government which last week announced a series of measures to boost bank lending for car buyers and dealers.
The government is expected to provide further stimulus especially after data released on Friday showed that India's GDP growth fell to a six-year low in the April-June quarter.
The recent merger of several public sector banks by the government is seen as a move to help the ailing auto industry as these larger banks would be willing to give more loans to buyers.
The rate cuts by RBI are expected to help banks cut their respective interest rates on loans. Though the banks have shown some positive action in this regard, it is yet to be seen if it has any significant impact.
Where are the e-vehicles?
The government and global push for electric vehicles (EV) could also be a reason for the slump in the auto industry. In India, EVs are not so common yet. Nevertheless, the environmental degradation and climate change are forcing the government to move towards more eco-friendly measures. The Union Budget by Finance Minister Nirmala Sitharaman had announced tax-rebates on purchase of e-vehicles. Except the Hyundai Kona, the industry doesn't have much to offer in the EV segment in India. The automakers are also trying to shift to more EVs, but it is yet to take off. MG Motor India and Tata Motors are expected to launch an electric cars soon. It could also be possible that several prospective car owners who want to change to a new car are waiting for more options in the electric segment.
"The (latest sales numbers) only highlight the need for the government to consider reducing the GST (goods and services tax)," said Rajan Wadhera, president of the Society of Indian Automobile Manufacturers (SIAM), adding that cutting taxes to 18 per cent from 28 per cent at present would lower the cost of vehicles and create demand. Wadhera said the government's recent measures have done little to boost sales growth and buyers are still cautious of spending while there is a trust deficit in lending money to dealers.
The dismal sales numbers come in a week when company executives and government officials are expected to discuss the stress in the sector at SIAM's annual conference in New Delhi on Thursday - one of the industry's biggest gatherings in India.
Analyst IHS Markit has slashed its 2019 growth forecast for India and expects car sales to fall by 11 per cent for the year. "It is not just lack of buyer interest but a loop of negative sentiment with automakers cutting jobs and production,"said Puneet Gupta, associate director at IHS Markit, noting that his initial forecast for 2019 had been growth in sales of 5 per cent.
Maruti Suzuki, India's biggest car maker by market share, reported a 36 per cent drop in passenger vehicle wholesales for August and has also slashed production for the month by about a third. Tata Motors, which reported a 58 per cent decline in sales of passenger vehicles and 45 per cent decline in sales of trucks to dealers to help them reduce their inventory, plans to offer discounts in the festive season starting this month to boost sales.
(With inputs from Reuters)
