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Business Trends

India passenger vehicle sales post first fall in 9 months

Dealers had added stocks last year following introduction of new nationwide tax

 Sales of SUVs recorded a 9% drop to 79,092 units last month even as demand for models such as Maruti Suzuki India’s Vitara Brezza remained robust.   © Hindustan Times/Getty Images

MUMBAI (NewsRise) -- Passenger vehicle sales in India dropped for the first time in nine months in July, as the year-earlier period saw dealers increasing their stockpiles following the rollout of a new nationwide Goods and Services Tax.

Sales of passenger vehicles, including cars, sport-utility vehicles, and vans fell 2.7% to 290,960 units last month from 299,066 units a year earlier, according to data from industry group Society of Indian Automobile Manufacturers, or SIAM.

India rolled out the GST in July last year. Under the new structure, tax rates fell for automobiles, allowing carmakers to cut prices. Most vehicles are taxed at the rate of 29%-31% under the GST, compared with about 31%-33% previously. Taxes on small cars fell by about 2% and by as much as 12% for SUVs.

Sales of SUVs recorded a 9% drop to 79,092 units last month even as demand for models such as Maruti Suzuki India's Vitara Brezza, Jeep's Compass, and Hyundai Motor's Creta remained robust.

Car sales fell less than 1% to 191,979 units. Automobile sales in India are counted as factory dispatches and not retail sales.

"While growth on a year-on-year basis has been slower, it was hit by the adverse base of GST re-stocking last year and hence not representative of future growth," Nomura said in a report.

Maruti Suzuki India, the nation's largest carmaker, suffered its first sales drop in 19 months in July. Sales of Vitara Brezza SUV and Ertiga minivan declined 4.9%.

Mahindra & Mahindra, India's second-largest SUV maker, reported a 13% increase in July sales. Tata Motors reported a 14% increase in volumes during the month on the back of new models Nexon and Hexa.

Domestic sale of trucks and buses, considered a barometer of the economy's health, jumped about 30% to 76,497 units in July. Truck demand has received a boost in India with the federal government focusing on building more highways, ports, and airports.

To be sure, rising prices of commodities such as steel and aluminum, and hardening interest rates are likely to cast a pall over the demand for automobiles. Maruti last week said it will raise the prices of its cars to account for the increase in costs.

Sales of two-wheelers increased 8.2% in July to about 1.82 million units, the SIAM data showed.

--Dhanya Ann Thoppil

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