AS FESTIVALS COME CALLING, CAR MAKERS ON THEIR KNEES, LITERALLY!
We celebrated Janmashtami last week, celebrating Krishna and over we began this week, celebrating Ganesha. Car makers are seriously hoping that these two Gods and all the others come to their rescue and push up sales.
Month after month, auto companies are reporting falling sales and like always, the companies are hoping that as the festival season kicks off. With Navratri and Diwali round the corner, and marriage season expected to start from November, car companies are praying to all the Gods.
Usually, once Ganesh Chaturthi comes calling, the “official” festive period for most white goods and realty companies has started – the time when they make the most. Especially car companies; for them it is moolah time as festivals is when we see people flocking to buy vehicles – be it car or two-wheelers.
But are people going to be buying cars even as RBI reduces rates and Govt has finally decided to look at the cut in GST. Automobiles currently attract the highest tax rate of 28% over and above a cess; this combined with an overall pessimistic mood, festivals too seem to be keeping the demand at bay. The GST council is scheduled to meet on the 20th of Sept and till then, auto companies can only hope and pray.
Indian manufacturers count factory dispatches to dealerships as sales and these have been worse than July for the month of August. Over the last 18 years, the industry reported the worst ever performance with dispatches plunging 34 % (YoY) and 31% on MoM.
Not looking at commercial vehicles and only at passenger cars, Maruti Suzuki posted a 36% YoY drop in demand for its cars, Tata Motors reported a 58% fall, M&M sales fell 32%, Honda car sales fell 51%, Toyota Kirloskar fell 24% and Hyundai Motors fell 17%.
Apart from an overall mood of despondency, the NBFC liquidity crisis and the 28% GST + cess, people have put off purchasing a vehicle for now as that does not figure out on the priority list. Or maybe, they are hoping for heavy discounts to come as the fiscal starts tapering. The perception is that as the 1st April 2020 deadline for BSVI compliant vehicles comes calling, very soon in Q3 and more so in Q4, companies could give heavy discounts to clear the existing BS VI stocks.
And now as the talk has begun of a probable reduction in GST or cess, people will once again postpone buying till there is clarity on the same. Thus September too might be wait-and-watch period.
Overall, FY20 could turn out to be one of the worst years for the auto sector. Maybe another way to look at it – before a rise, there is always a sharp fall. And we are witnessing the demand curve on the southward path.
Well, given the massive traffic jams we currently face in almost all parts of the country, we can take some succor from the fact there are lesser news cars on the road currently. Come to think of it, traffic is like our Indian democracy, every time you move ahead, you think you are getting on and going somewhere, only to hit another traffic jam!