MUMBAI (NewsRise) -- Sales of passenger vehicles in India slumped 31% in July, the worst monthly decline in 18 years, underlining a persistent slowdown in demand and triggering fresh calls for government action to revive the sector.
Data from the Society of Indian Automobile Manufacturers showed sales of passenger vehicles totaled 200,790 units in July after falling for the ninth consecutive month. Sales of sport utility vehicles fell more than 15%, while passenger car sales slumped 36%.
"There is an urgent need for a revival package," to prevent the crisis from worsening, Vishnu Mathur, SIAM's director general, told reporters in New Delhi. Even a temporary cut in the Goods and Services Tax rate will help, Mathur said.
Demand for vehicles in Asia's third-largest economy has been cooling for more than a year amid a credit crunch triggered by a crisis in the non-banking financial sector.
Automakers like Maruti Suzuki India, the country's largest, and Tata Motors have cut production and, according to observers, hundreds of thousands of jobs, driving the industry into one of its worst downturns ever.
Stocks of these companies have been among the worst performers on the local bourse. For example, Maruti shares have lost 22% since January while Tata Motors shares have fallen 29%. By comparison, the benchmark Sensex has gained 2.4% in the same period.
With many dealerships going out of business, the industry has ratcheted up calls for measures such as a cut in the GST rate to 18% from 28%. Although India has cut policy interest rates four times in a row since February, more will be needed to ease tight liquidity conditions, observers say.
While the government has started a consultation process to address the slowdown, it is yet to announce any measures to boost demand.
Even the steep discounts ahead of the festival season that began this month are not helping, Mathur said.
At the start of the financial year in April, SIAM forecast annual passenger vehicles sales growth of 3%-5%. Given the slowdown, the forecast may have to be revised, Mathur said.
Maruti's sales plunged 34% in July, its worst monthly fall in seven years. The carmaker's overall sales grew just 4.7% last year. According to a recent Reuters report, the company has laid off its temporary workers, whose numbers declined 6% year on year at the end of June. It also cut production by more than 10% in the first six months of this year.
Last week, Tata Motors, which reported a 34% fall in domestic sales of its passenger vehicles for July, said it has shut some plants in the western Indian state of Maharashtra due to difficult market conditions. Meanwhile, rival Mahindra & Mahindra, whose sales fell 15% in July, said it will cut production for up to 14 days this quarter.
The latest SIAM data showed sales continue to decline across segments in July. Sales of trucks and buses fell 26% to 56,866 units while those of two-wheelers declined 17% to about 1.51 million units.
The slowdown is also hitting auto component makers. Smaller player Jamna Auto Industries, which makes suspension systems for Tata Motors and Ashok Leyland, said it might shut all its nine plants in August due to weak demand. The industry was hit by a double whammy when the federal budget in June raised duties on auto parts and slapped additional taxes on fuel.
--Rituparna Nath and Dhanya Ann Thoppil