Car manufacturers demand tax cuts, analysts cut forecasts as sales plummet
NEW DELHI: Sales of passenger vehicles will fall for the tenth consecutive month in August, which will force analysts to cut their sales forecasts for 2019 and strengthen the case of automakers of tax cuts to boost demand.
Sales data from the six major car manufacturers in India, including the Indian businesses of Suzuki Motor Corp and Toyota Motor Corp, show that passenger car sales for August fell 34% compared to the same period of the year previous. These six manufacturers represent more than 90% of the market.
Data from Tata Motors and Mahindra Mahindra, which together account for approximately two-thirds of the commercial vehicle market, show that truck sales, an indicator of economic activity, fell by almost 40%.
The sharp decline in sales to dealers worries industry executives who are renewing orders for a tax reduction on cars, two-wheelers and trucks, while car analysts are cutting their sales forecasts for the year.
The crisis in the automotive sector is a big problem for the government of Prime Minister Narendra Modi, which last week announced a series of measures to boost bank loans for buyers and car dealers. The government is expected to provide more stimuli, especially after data published on Friday showed that India's GDP growth fell to a minimum of six years in the quarter from April to June.
The (latest sales figures) 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 reducing taxes to 18% of 28% today would reduce the cost of vehicles and create demand.
Wadhera said recent government measures have done little to boost sales growth and that buyers are still cautious about spending, while there is a lack of confidence in lending money to distributors.
The lousy sales numbers arrive in a week when company executives and government officials are expected to discuss the stress in the sector at the annual SIAM conference in New Delhi on Thursday, one of the largest meetings in the industry .
IHS analyst Markit has cut its growth forecast for 2019 in India and expects car sales to drop 11% for the year.
It's not just about buyers' lack of interest, but about a circle of negative feelings with car manufacturers that reduce jobs and production, said Puneet Gupta, associate director of IHS Markit, and noted that his initial forecast for 2019 had been a 5% sales growth.
Maruti Suzuki, India's largest automaker by market share, reported a 36% drop in wholesale sales of passenger vehicles by August and has also reduced production of the month by approximately one third.
Tata Motors, which reported a 58% decrease in sales of passenger vehicles and a 45% decrease in truck sales to dealers to help them reduce their inventory, plans to offer discounts on the holiday season that begins this month to increase sales.