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Auto sales record worst decline in a month in almost two decades

Sumant Banerji     August 13, 2019

Sale of automobiles in India crashed by nearly 19 per cent in July, the worst ever decline in a month on a year-on year-basis since December 2000 when sales had slid by 21.8 per cent.

Passenger vehicle sales registered a 31 per cent decline at just 200,790 units. This was also the steepest since December 2000 when it had declined by 35.22 per cent. Sales that month, however, were artificially low as Maruti Suzuki, country's largest carmaker, was crippled by labour unrest at its Gurgaon factory at that time. Passenger vehicles sales have now declined for nine months on the trot and in 12 of the last 13 months.

Other segments fared no better. Commercial vehicle segment that is considered a true barometer of the overall economy saw its sales decline by 25.71 per cent while the distress in the rural economy was highlighted by the 16.8 per cent slide in sale of two wheelers. Motorcycle sales have declined faster than scooters at 19 per cent to 12 per cent, respectively.

"These numbers are an urgent call for the government to roll out a stimulus package without further delay," said Vishnu Mathur, director general, Society of Indian Automobile Manufacturers. "Without that, there is no hope for a revival. We are almost on the verge of festive season but there is less hope and more nervousness within the industry. If taxes are not lowered, this fiscal will be a washout."

Not surprisingly this is the worst start to any fiscal for the industry. Overall sale of automobiles is lower by almost 14 per cent at 7,910,554 units in April-July 2019 over the same period last year. Passenger vehicles are down 21.56 per cent at 913,410 units, commercial vehicles down by 13.57 per cent at 265,164 units and two wheelers at 6,525,763 units, 13 per cent less than last year.

The slowdown in the industry is largely on account of a bad festive season last year which led to the problem of higher inventories, tight liquidity with banks as a fallout of the NBFC crisis and an overall sluggish economy and low consumer sentiment. As many as 280 dealerships have had to shut shop in the last 18 months due to the slow off-take of vehicles. Another industry that is facing the brunt is the ancillary sector that is totally dependent on the performance of the original equipment manufacturers. Experts say almost 10 lakh jobs are in danger if the slowdown persists beyond the next few months.

Cumulatively, the $119 billion automobile industry in India supports 37 million people directly or indirectly and accounts for 7.1 per cent of the country's GDP and 49 per cent of its manufacturing GDP. The industry has been asking for a blanket reduction of GST on all category of vehicles. Currently, automobiles are bracketed under the highest slab of 28 per cent. Further, an additional cess ranging between 1 and 22 per cent is also imposed on cars. Industry wants a standard rate of 18 per cent.

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