Car sales slide 19% to 10-month low

Car sales in India declined 18.56 per cent during August 2012, which is the biggest drop in 10 months, prompting industry body Society of Indian Automobile Manufacturers (SIAM) to seek excise duty cut from the Central government.

The overall vehicle sales in the country also registered a drop of 3.9 per cent to 13,54,436 units in August this year, the biggest decline in more than three and half years.

Stating the industry is “now entering a desperate situation”, SIAM also sought a stimulus package similar to the one given during the 2008-09 downturn while pointing out that exports also posted highest decline in more than 11 years, falling 26.83 per cent during the month under review.

It may be noted that during the 2008-09 downturn, the government had provided a stimulus package by reducing CENVAT by 4 per cent. For the commercial vehicles segment, public sector banks were allowed to provide line of credit to NBFCs on new purchases and one-time assistance under Jawaharlal Nehru National Urban Renewal Mission to purchase busses for urban transportation. As per latest data from SIAM, domestic cars sales in August stood at 1,18,142 units compared to 1,45,066 units in the same month last year, down 18.56 per cent.

The rate of decline is the highest since October 2011.  Commenting about it, SIAM's senior director Sugato Sen said: “This is the time when wholesale numbers should be picking up as dealers stock-up to meet festive season demand, but this has not happened. We are entering a desperate situation.

We need help from the government.”

He said the excise duty on automobiles, which was increased in this year’s Budget, needs
to be reduced, particularly for the commercial vehicles segment. 

Car exports during the month stood at 36,104 units, down 26.83 per cent. The previous lowest decline in exports was recorded in March 2001, when overseas shipments dropped 48.37 per cent to just 2,221 units.

“The decline in exports has also affected the overall production of companies here in India,” he said.

In this year’s Budget, excise duty on small cars was hiked to 12 per cent from 10 per cent for  petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc, but for cars where the length exceeded four metres, it was increased to 24 per cent from 22 per cent and a fixed duty of Rs 15,000.

Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively were charged with an ad valorem duty of 27 per cent, instead of the earlier 22 per cent and a fixed duty of Rs 15,000.
To miss forecast

SIAM said its forecast of registering a growth of 9-11 per cent in this fiscal is unlikely to be met.

“If the declining trend continues, if September sales are also in the negative, then we won’t meet the growth target,” Sen said. In July, SIAM had lowered car sales growth forecast to 9-11 per cent for this fiscal due to weak macro-economic conditions, from an earlier projection of 10-12 per cent.

Considering the current trend, this festive season could be one of the worst, Sen said.