Why automobile retail sales in July remained muted despite positive wholesale figures

Sales of automobiles at the retail level remain muted during the month of July chiefly due to the pre-GST sales during the month of June.

A customer inquiring about a car at a dealership. Photo: IANS

Key highlights:

Good growth in automobile sales was mainly due to the wholesale sales at the dealership level

Dealership stocked up on vehicles in July

Retail sales for the full month they remained muted

The automobile industry reported healthy growth in sales during the month of July. This was due to the roll-out of the goods and service tax (GST) at the start of the month had led to a reduction in prices of vehicles which were passed on to the customers, apart from additional discounts that automobile companies may have offered to push sales.

Sales of car companies such as Maruti Suzuki rose by a strong 22.4%, while Tata Motors' sales was up 10.23%, Ford India was up 18.96%, Honda Cars up 21.74% and Volkswagen grew by 10.5%. In the commercial vehicles segment Tata Motors' sales was up 15% and Ashok Leyland grew by 14.19%.

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In the two-wheeler segment Hero MotoCorp grew by 17.13%, Honda Motorcycle and Scooters posted a 19.96% growth, TVS Motor was up 9.34% and Royal Enfield reported a 20.75% growth.

However, this good growth in automobile sales was mainly due to the wholesale sales at the dealership level. This was as dealership stocked up on vehicles as very little stocking in the month of June and pre-GST sales at the retail level had cleared most of the vehicles in stock.

“Auto industry reported healthy wholesales during July17 on the back of channel filling post GST related disruption during the previous month. Almost all segments of the industry posted robust double-digit wholesale growth,” said analysts Vivek Kumar and Shyam Sundar Sriram in a JM Financial report.

While wholesale sales to dealership reported a double-digit growth in July, on the retail front (to end customers) the sales remained muted.

The analysts said that the first fortnight of July witnessed sluggish demand and retail sales owing to discount-led pre-buying during June 2017. “Although, retail sales improved during the second fortnight, for the full month they remained muted,” they added.

The report further said that with dealer inventory stocked-up again, OEMs focus will shift to retail sales during August, before building stocks again in preparation for the festive season during the beginning of 3QFY18.

While commercial vehicle sales improved during the month post the BS4 introduction and GST disruption and production ramp-up on easing of supply constraints.

“However, CV demand may take a few more months to normalise fully as freight traffic continues to be weak, putting a downward pressure on both, freight rates and operator’s profitability,” the analysts said.

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