While two-wheeler manufacturers reported improved wholesale volumes in August, passenger vehicle (PV) wholesale volumes continued to show weakness, declining 2% YoY across the four listed companies. Analysts attributed this to the uncertainty created by the proposed GST rate rationalization, which has prompted consumers to postpone purchase decisions.
Mahindra & Mahindra (M&M) SUV dispatches fell 9% YoY to 39,399 units in August. According to domestic brokerage firm Motilal Oswal, this marked the first monthly decline in the UV segment since November 2021, as the company adopted a conservative stance to avoid burdening dealers with excess stock ahead of the anticipated GST changes.
Maruti Suzuki India volumes remained largely stable, slipping 0.6% YoY to 180,683 units. A strong 40.5% YoY growth in exports was offset by a 7.5% YoY drop in domestic sales. Hyundai Motor India reported a 4.2% YoY decline in PV sales, while Tata Motors’ volumes fell 2.6% YoY to 43,315 units. On a YTD basis, aggregate PV volumes for the four listed companies were up 1% YoY, the brokerage noted.
Motilal Oswal noted that retail car sales continue to face pressure as customers are postponing their purchases in anticipation of possible GST reduction on automobiles.
If the proposed peak GST rate on SUVs is lowered to 40% from the current 43–50%, the brokerage noted that benefit in absolute terms would be much larger for SUVs than for entry-level cars, given their higher average selling prices.
Another point of uncertainty for customers is whether the cess will be retained, and if not, how they will offset this at a later date.
The brokerage highlighted that as customers delay buying decisions, dealer inventories are gradually increasing. This has restricted dealers from carrying additional stock, which is weighing on OEM dispatch volumes.
“Certain dealers of Maruti Suzuki indicated that while actual retail remained weak, footfalls are actually rising, as customers who were on the sidelines are now considering buying a vehicle after the proposed rate cut. Dealer-level inventory for Maruti Suzuki currently exceeds two months at the dealers we checked with. In the case of Mahindra & Mahindra, we understand that the company is purposely reducing dispatches to keep inventory in check,” said the brokerage.
GST Council meets Wednesday
The 56th GST Council meeting, chaired by Union Finance Minister Nirmala Sitharaman and comprising state finance ministers, will be held tomorrow to discuss a ‘next gen’ GST reform that proposes just two standard tax rates of 5% and 18% by shifting items from the existing 12% and 28% slabs.
All passenger vehicles (PVs) currently fall under the 28% GST bracket, but sub-segments attract different rates depending on fuel type and cess. Small cars up to four meters are taxed at 28%, while larger cars face much higher rates of 43–50%.
Motilal Oswal estimates suggest that any GST rate cuts would likely be limited to small cars in order to benefit the middle class, while larger cars may continue to be classified as ‘luxury’ and remain in the higher tax slab. As a result, it believes that Maruti Suzuki, with its strong small-car portfolio, is expected to emerge as a key beneficiary compared to its peers.
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