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Automobiles

India auto sales fall in November as consumers curb spending

Industry group calls for tax reductions to spur demand

Tata Motors and other Indian automakers are grappling with weakening consumer sentiment as the economy slows.   © AP

MUMBAI (NewsRise) -- Passenger vehicle sales in India declined in November after a blip in the previous month, prompting the nation's main auto industry group to call for tax cuts to spur demand for cars and motorcycles.

Sales of passenger vehicles fell 0.8% to 263,773 units last month, the Society of Indian Automobile Manufacturers, or SIAM, said in a statement on Tuesday. Sales had risen 0.3% in October on the back of festival demand.

Cars witnessed an 11% slump to 160,306 units in November, although sport-utility vehicles saw sales surge nearly 33%. SIAM's automobile sales are counted as factory dispatches, and not retail sales.

Indian automakers such as Maruti Suzuki India and Tata Motors have been contending with the worst-ever downturn for more than a year amid weakening consumer sentiment in a slowing economy.

The industry is heading toward the first annual decline in vehicles sales in six years in the fiscal year ending in March, spurring cutbacks in production and stirring job losses.

"We are hopeful that the government will pay heed to the industry's long-standing demand for a cut in the Goods and Services Tax rate," Rajesh Menon, the director general of SIAM, told reporters at a news conference in New Delhi.

The industry body is planning to meet the finance minister to reiterate the need to reduce GST rates from the current 28%, Menon said. Further, a likely cut in the personal income tax rates may also act as a catalyst for demand revival, he added.

According to media reports, Prime Minister Narendra Modi's government may consider restructuring the personal income tax rates in a bid to boost the sagging consumption demand. Earlier this year, the government rolled out an eight percentage-point cut in headline corporate tax rate to 22% that helped bolster company profits.

SIAM's optimism contrasts with auto-parts makers who remain wary of a further slowdown in demand next fiscal year, especially after India rolls out the Euro VI fuel standards in April. According to the Automotive Component Manufacturers Association of India, sales in the first half of next year may be "tough."

Both SIAM and ACMA flagged concerns about shrinking vehicle financing options as banks clamped down on lending because of surging bad debts. About two-thirds of vehicle purchases in India are financed by credit from banks and other financial institutions.

Last week, Maruti Suzuki, the nation's top car maker, reported a 1.9% decline in November sales. Still, on Monday, the company said its production grew 4.3% during the month, the first such increase in nine months.

Mahindra & Mahindra, the maker of Scorpio and Bolero SUVs, reported a 10% drop in November sales of its passenger vehicles, while Tata Motors, India's largest automaker by revenue, saw a 25% slump.

Domestic sales of trucks and buses fell 15% to 61,907 units in November. Sales of two-wheelers declined more than 14% to about 1.41 million units, the SIAM data showed.

--Rituparna Nath and Dhanya Ann Thoppil

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