August proved to be a month of mixed performance for the Indian automotive industry, with sales figures showing a blend of positive growth and stagnant trends. The Federation of Automobile Dealers Associations (FADA) reported a total retail sales figure of 19.64 lakh units, indicating a 2.84% increase compared to the previous year. However, there was little change on a month-on-month comparison. This stability can be largely attributed to recent adjustments in the Goods and Services Tax (GST), which were announced by Prime Minister Narendra Modi on August 15th from the Red Fort. This announcement led many prospective buyers to delay their purchases in anticipation of price reductions.
The consequence was a rise in inquiries and bookings throughout August, but a corresponding slowdown in actual sales. Customers were primarily waiting for the new GST rates to take effect from August 22nd. FADA indicated that while there was significant interest, many customers hesitated to finalize their purchases. Numerous buyers opted to postpone until the implementation of GST 2.0 on September 22nd, leading to a standstill in sales across all market segments. Despite this, an upswing in sales is projected from September.
Sales of passenger vehicles, encompassing cars and SUVs, totaled 3,23,256 units in August. This represented a 0.93% increase year-on-year, but a 1.63% decrease month-on-month. While the start of the month saw positive impacts from Onam and Ganesh Chaturthi, consumer purchases slowed in the latter half of the month due to the pending GST changes. Moreover, showroom traffic was affected by heavy rainfall and flooding in urban areas. FADA Chairman C.S. Vigneshwar anticipates a positive impact from the festive season, which starts at the end of September. With the downward trend in interest rates and increased transparency in GST, the sector is expected to experience accelerated passenger vehicle sales.
During August, two-wheeler sales amounted to 13,73,675 units, reflecting a 2.18% increase year-on-year and a 1.34% rise month-on-month. Despite strong inquiries, sales were impacted by heavy rainfall in several states, particularly affecting rural demand. Scooter sales showed strong performance, while sales of commuter motorcycles were delayed. Dealers reported higher bookings for September-October, implying a buildup of demand.
FADA maintains that the demand that was suppressed in August isn’t lost, but rather delayed. With a steady GDP, low inflation, and a favorable monsoon, the outlook indicates strong demand during the upcoming festive season. September will be divided into two sections. The initial period, coinciding with the Shradh, will be relatively subdued, however, after September 22nd, the convergence of GST 2.0 and Navratri is anticipated to spur significant sales growth across passenger vehicles, two-wheelers, CVs, and three-wheelers due to pent-up consumer demand.
