Automakers slow deliveries in run-up to GST

Automakers are slowing deliveries as dealers are not keen on stocking more products due to fear of losses on likely drop in sales this month and to an extent in July.

Under the new tax regime, there is a provision for refunding excise duty on unsold stocks, but there will be no provision for refunding central sales tax, infrastructure cess and national calamity contingent duty, which is making the dealers edgy.

For example, the average waiting period for some of the products of market leader Maruti Suzuki has increased to 16-17 weeks as compared to 6-8 weeks earlier. However, those who had booked much earlier may not face difficulty in deliveries.

At the same time, companies and dealers are aggressively pushing sales of existing products and even spending on promotions and offering heavy discounts on old products.

A Mumbai-based executive from Maruti Suzuki said the customers are confused over the impact of GST which has affected sales.

"This has surely seen a muted growth but it will be for a short while. It will surely pick up once things get settled in next few weeks," the executive said.

Abdul Majeed, an analyst with PwC, said, "People will obviously be hesitant in buying vehicles for the next 2-3 months. So the OEMs will surely go slow on deliveries as it makes no point in dumping the vehicles with the dealers."

Some of the companies including Maruti, Hyundai and Bajaj have reportedly assured their dealers some compensation for their losses.

Meanwhile, tractor manufacturers are unhappy as there is a 28% GST levy on parts and components of tractors but parts and components of construction equipment, which are close to tractors especially under 80 HP, will attract only 18% tax. Both sectors have similar emission norms but are being treated differently when it comes to GST, despite several representations to the GST Council, they said. The manufacturers hope that GST rates on parts and components would be revised to 18%.

They are also upset over transition provision on tractor stocks held at depots and dealerships. With just nine days for the new tax, any delay in extending transition provision could increase tractor costs by Rs 30,000 to Rs 34,000 for farmers, which will impact the agriculture sector negatively, they said.

Tata Motors, too, feel GST will have an impact on sales, especially in CVs.

Ravindra Pisharody, the then executive director, commercial vehicles at Tata Motors, had told DNA Money in April that there was confusion among customers on account of several factors. "We are looking for more stable period after August-September period of this year," he had said.

The slowdown in vehicles sales comes months after demonetization and implementation of BS IV took a toll on the earnings of the original equipment manufacturers. In November last year, the industry suffered immensely especially in the semi-urban and rural areas due to the effect of demonetization. It took a couple of months for sales to pick up. In March end came another shocker when the Supreme Court in a tough stand against polluting vehicle technologies and ordered that BS-III vehicles will not be allowed to be sold since the beginning of April 1.

According to statistics with the automobile makers group SIAM, while commercial vehicles and two-wheelers saw a dip in their fortunes revealing lack in a revival of the rural economy, the passenger car segment did better.

...& ANALYSIS

• Companies and dealers are aggressively pushing sales of existing products, even spending on promotions
   
• Players including Maruti, Hyundai and Bajaj have reportedly assured compensation for losses