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Kerala floods hit sale of passenger vehicles in August

BusinessToday.In     September 12, 2018

Auto stocks took beating on Tuesday, reacting to data from the Society of Indian Automobile Manufacturers (SIAM) that showed that domestic passenger vehicle (PV) sales declined for the second month in succession in August. The BSE auto index fell closed 60.06 points or 0.25%  higher at 23,963. It fell 1.52% yesterday to close at 23,903 level.

According to the automobile industry body, PV sales posted a 2.46% year-on-year drop last month to 287,186 units, due to partial impact of the recent floods in Kerala and a high base effect courtesy GST in the year-ago period. The PV sales had declined 2.71% in July, after rising for nine straight months, due to the same base effect.

Sales had shot up in the first few months after GST's roll-out in July 2017, as automakers cut prices to pass on lower tax on PVs under the new tax regime. However, the cess on most vehicles has since been increased, causing manufactures to raise prices.

Car sales declined 1.03% to 1,96,847 units last month, as against 1,98,892 units in August 2017, while utility vehicles posted a drop of 7.11%. Dispatches to Kerala, accounting for 8% of India's PV market, were impacted by the floods at a time when sales are typically high due to the Onam festival. These are wholesale numbers as manufactures usually declare only shipments to dealerships and not retail sales.

Samsher Dewan, vice-president and sector head for corporate ratings at ICRA, told the Economic Times that the week-long truckers' strike last month, which "created logistics related problems", also contributed to the lower sales.

According to SIAM deputy director-general Sugato Sen, PV sales are likely to remain subdued for a couple more months as the GST-related high base effect would continue till September or early October.

On the other hand, while two-wheelers sales fared better than PVs, growth remained tepid at 2.91%, primarily due to restrictions in West Bengal - a significant market for two-wheelers - that vehicles should be sold only to those holding driving licence. The state reportedly accounts for monthly sales of about 45,000 units but the volume fell to around 17,000 units in August.

"Usually parents buy two-wheelers for their children who do not have driving licence, due to factors such as loan availability, and the issue in West Bengal has still not been resolved," SIAM Director-General Vishnu Mathur, told the daily. Overall, two-wheeler sales increased to 19,46,811 units from 18,91,685 units in the year-ago period.

The one category that continues to show strong upward momentum is commercial vehicles, driven by the uptick in infrastructure spending as well as the continuous demand from the construction industry. Sales of commercial vehicles jumped 29.56% to 84,668 units in August, against 65,350 units in August 2017. Three-wheeler sales rose 22.83% to 63,199 units.

Vehicle sales across all the categories collectively registered a growth of 3.43% to 23,81,931 to units last month, while total production increased 6.79% to 2,816,161units.

With PTI inputs

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