India’s auto sales to consumers are expected to rise during the festive period due to the government’s consumption tax rate cuts, a dealers’ body said on Monday.
However, the tax moves will lead to buyers deferring purchases as the cuts kick in from September 22, according to the Federation of Automobile Dealers Association.
Car sales to customers rose 2.84% year-on-year in August, the dealers’ body said, helped by the festive season, which typically begins in that month.
“Dealers remain confident that September will herald the beginning of an accelerated growth cycle, powered by both policy tailwinds and festive fervour,” the Federation of Automobile Dealers Association President C S Vigneshwar said.
India plans sweeping consumption tax cuts by October to boost economy
Last week, India’s Goods and Services Tax Council slashed taxes on small cars and two-wheelers to 18% from 28% while the effective tax on large-engine capacity cars and SUVs was lowered to 40% as an additional levy was dropped.
Latest data from automakers on their sales to dealers suggested an inventory build-up, several analysts said, although some carmakers moderated shipments ahead of the tax decision.
The average number of days a car remained in showrooms edged up to about 56 in August, after holding steady at 55 for the previous two months, above the dealers body’s recommended threshold of 21 days.
India’s top four carmakers - Maruti Suzuki, Mahindra & Mahindra, Hyundai Motor India, and Tata Motors, which control 80% of the market, saw their combined sales to dealers fall 8.7% in August.
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