Hyundai to Honda car dealers set to see slower sales in November

Despite a number of carmakers remaining positive of a strong double-digit growth in wholesale volumes in November owing to a low base due to the government’s decision to ban high currency notes last year, car dealerships paint a different picture. A Hyundai dealer based in Mumbai said sales have been lower than even November last year despite the demonetisation. “Sales have been unusually low, bookings are down by around 30%,” he said. Car dealers are attributing a dip in sales to expectation of customers that a likely reduction in the GST rates of cars is right around the corner. A Honda dealer said, “Customers feel that the government will slash tax rates on cars as well, like it has been doing on other items. On the contrary, the government usually raises taxes on cars rather than reducing them.” In a series of meetings, the GST Council has reduced tax rates on a variety of items. In its latest meeting earlier this month in Guwahati, the Council slashed rates on 178 items to 18% from 28%. After the reduction in tax, only 50 items are now in the top tax bracket of 28%.

Car retail sales are usually low in November, as most of the buying happened in the festive season, which fell in September and October. Overall retail sales in the festive season for OEMs (original equipment manufacturers) this year were robust. Buyers also skip purchasing in November as they wait for the year-end discounts provided by auto manufacturers in December.

In November 2016, wholesale volumes of passenger vehicles grew by less than 2% to 12,43,251 units because of demonetisation. Most car makers, save for some like Maruti Suzuki and Tata Motors, had reported a steep decline in sales. Due to the low base, auto makers have been hoping for a healthy growth this November.

An analyst at a domestic brokerage suggested that sales may be somewhat subdued this November year-on-year, because some festive season sales had spilled into November last year. This was because Diwali was celebrated on October 30 in 2016. Binaifer Jehani, director of Crisil Research, said: “Demonetisation had little impact on PV sales because dealers resorted to alternate sources of cash such as cheques, cards, e-wallets.” She, however, added that many dealers are optimistic about selling slightly higher passenger vehicles in November this year on the expectation that purchases will pick up in the last week of the month. But that too isn’t a very promising scenario, given that passenger vehicle sales grew at a healthier 7.6% in the first seven months of the year.