With auto sales in the red across nearly all segments in August, the Society of Indian Automobile Manufacturers (SIAM) has hinted that the Government should think of a rollback in excise duties.
Such a move would provided a much needed “stimulus” to the auto sector at a time when consumer sentiment is low on the back of rising fuel prices and high interest rates.
The excise duties were raised by 2 per cent for small cars to 12 per cent in the Budget announcements last March. For large cars (above four metre length), however, excise went up by 5 per cent to 27 per cent (with ad valorem rate).
Sugato Sen, Senior Director at SIAM, said, “Everything is negative. Maruti is responsible to a large extent, but the overall slowdown in the economy is taking a toll. It is time for the Government to relook at the excise tax increase in the Budget this year.”
Revise Growth Forecasts
In August, car sales fell 19 per cent to 1.18 lakh units. With about a 40 per cent market share, Maruti Suzuki’s closure of the troubled Manesar plant in July-August was the main reason - the plant restarted operations on August 21 (closed since July 18), but at less than a fourth of its original capacity. Maruti posted a 35 per cent drop to 50,129 units in the month.
Total passenger vehicle (PV) sales were down 4 per cent to 1.84 lakh units (passenger vehicles includes cars, utility vehicles and vans) in the month. A better performance (than cars) in the overall PV segment is because of a 71 per cent growth seen in diesel-dominated UV sales, led by Mahindra and Tata Motors.
Sen said that the lacklustre performance may prompt SIAM to revise the growth projections for the auto industry downwards. “Every quarter we revisit our forecast. If you look at the numbers this time, it is obvious it will be revised downwards, but the announcement will be next month,” he said.
Two-wheelers
The last bastion of the auto industry, two-wheelers in August posted negative growth for the first time in over three-and-a-half years. Sales fell 4.5 per cent to 1.05 million units, with market leader Hero MotoCorp recording a 12 per cent drop.
Burdened by high inventories, two-wheeler firms have cut production 10-20 per cent last month and expect festive season demand to clear stocks.
Meanwhile, commercial vehicle sales were 4 per cent in August, led by a 13 per cent growth in light CV sales. “Only LCVs showed a positive growth, but M&HCV is down denoting weak economic activity,” Sen said.