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CVs steal show as vehicle sales spurt in second month of GST

Commercial vehicles grow 23%; car sales grow 13% as uncertainty over GST cess continues

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Vehicle sales maintained their good run in the second month of goods and services tax (GST) in August with commercial vehicles spurting ahead of passenger vehicles that were clouded by uncertainty over cess on cars.

Passenger vehicle sales grew 13.76% year on year in August on top of 8.52% growth it logged in July. Similarly, two-wheeler segment grew 14.69% year on year in August. It grew 13.73% July.

The biggest growth was in the commercial vehicle segment at 23.22%. It had grown 13.78% in July.

According to the industry analysts, the demand for passenger vehicles is expected to get slightly better is coming days as things have now become clearer after GST Council on Saturday announcing segment wise cess rates. The council has increased cess on mid-sized cars to 45% from 43%, on large cars to 48% from 43% and on SUVs to 50% from 43%. There were no changes announced on small cars.

“GST Council has taken the middle path for the overall increase of cess on bigger vehicles including SUV as growth looks positive for automotive industry this year. Luxury and bigger vehicles will have normal growth as opposed to significant growth as expected due to higher GST rates," said Abdul Majeed, Partner, Price Waterhouse.

Most of the car automobile manufacturers had passed the benefits of the GST to the customers after the rates came down under the GST that was implemented on July 1. However, the ordinance to increase the cess had created uncertainty among the car manufacturers who apprehended that the government may increase it to the highest at 25% from 15% earlier.

Sridhar Venkatachari, partner, Grant Thornton India, said the auto sales have been encouraging across segments due to post GST pricing, money in the hands of customers arising out of pay commission revision, more demand for BS IV vehicles and good monsoon resulting in an increase in rural demand. “The more encouraging results are in the commercial vehicles which is very impressive and an outcome of some of the reasons mentioned above. There could be a slight setback on passenger vehicles in the ensuing month after an introduction of the additional cess, while the festival season is expected to perk up the demand.” Venkatachari said.

The growth in CV during August also brought some relief to Tata Motors, which had seen its fortune dip in the past few years in the CV segment. Its CV sales in the domestic market rose 34% year on year. Girish Wagh, head, commercial vehicles business at Tata Motors, said the CV segment grew exponentially backed by several factors like positive sentiments, good rains, loosening impact of the demonetization among others.

Similarly, Ashok Leyland, another major player in CV segment, sales growing 25% in August.

REVVING UP

  • Demand for passenger vehicles is expected to get slightly better is coming days
     
  • Majority players had passed the benefits of the GST to the customers
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