The Indian automotive sector experienced a challenging August, with sales showing both growth and stagnation. The Federation of Automobile Dealers Associations (FADA) reported total retail sales of 19.64 lakh units, reflecting a 2.84% rise year-over-year, but with little change compared to the previous month. This stability was primarily due to the recent Goods and Services Tax (GST) adjustments, announced by Prime Minister Narendra Modi from the Red Fort on August 15th. This announcement caused potential buyers to delay their purchases, hoping for lower prices.
The consequence was an increase in inquiries and bookings throughout August, yet a decrease in actual sales. Customers were waiting for the new GST rates to take effect from August 22nd. According to FADA, while interest was high, many buyers hesitated to finalize purchases. A significant number of consumers chose to delay until the GST 2.0 implementation on September 22nd, which affected sales across all segments. Despite this, an improvement in sales is expected from September.
Passenger vehicle sales, including cars and SUVs, reached 3,23,256 units in August. This represents a 0.93% increase year-on-year, but a 1.63% decrease month-on-month. Early deliveries benefited from the Onam and Ganesh Chaturthi celebrations, but customer purchases slowed in the latter half of the month due to the GST changes. Additionally, heavy rainfall and urban flooding affected showroom visits. FADA Chairman C.S. Vigneshwar believes the upcoming festive season, starting at the end of September, will provide a boost. With decreasing interest rates and increased GST clarity, passenger vehicle sales are anticipated to accelerate.
Two-wheeler sales in August totaled 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. Scooter sales remained strong, while commuter motorcycle purchases were postponed. Dealers recorded higher bookings for September-October, showing a build-up of demand.
FADA believes the demand lost in August is not lost, but deferred. With a stable GDP, lower inflation, and a favorable monsoon, the festive season is expected to see robust demand. September will be split into two periods. The first, during the Shradh period, will be quiet. However, after September 22nd, when GST 2.0 and Navratri coincide, sales are expected to increase across passenger vehicles, two-wheelers, CVs, and three-wheelers due to pent-up demand.