Car Sales Down By 20.55 Per Cent In May 2019 As Automakers Try To Control Inventories

De-stocking is a common phenomenon in the auto market when the demand is not adequate. Also, the industry is on the verge of a big upgrade and automakers have also started to keep a check on inventories at the onset of Bharat Stage 6 (BS6) and BNVSAP (crash test norms) which will require them to introduce updated models which will adhere to all the upcoming regulations. Mahindra has already announced to shut down their production plant for up to 13 days and other carmakers as well are keeping a check on production.

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In May 2019, the passenger vehicle (PV) segment witnessed a decline of 20.55 per cent selling 239,347 units as against 301,238 units which were sold in the same month last year. However, retail sales which is the real reflector of market demand is down by just 1.46 per cent in the same month selling 270,048 units as compared to 274,037 units which were sold last year. The difference between the wholesale and retail figures itself speaks about the stock correction measures taken by the industry. Moreover, the production figures are down by 12.23 per cent as well which also substantiates the fact that carmakers are avoiding accumulation. The industry manufactured 315,168 units in May 2019 as against 359,078 units which were manufactured in the same month last year.

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Other than de-stocking, sales were also down due to general elections and low credit availability. Speaking on the industry outlook, SIAM has requested the government to reduce the GST on cars to 18 per cent which will help the industry to absorb the cost of BS6 transition. "Cars are set to become expensive post BS6. Hence, we have asked the government to bring down the GST rates which will help to keep a check on the prices to a certain extent," said Vishnu Mathur, Director General, SIAM.

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SIAM is also requesting the government to reduce the corporate tax as government has withdrawn incentives on R&D. Lower corporate tax will also help the industry to use the saved money on development of new technologies. That said, the only thing that can work in favour of the industry at this point is the new launches which are expected to bring in some excitement among car buyers.