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High excise duty dents medium, heavy commercial vehicle sales
May, 11th 2012

Hit by a hike in excise duty, the sales of medium and heavy commercial vehicles (M&HCVs) declined by 11.60 per cent last month -- to 19,914 units.

While the M&HCVs used for passenger transportation grew by 32.81 per cent to 3,724 units in April, the sales of goods carriers dropped by 17.92 per cent during the period. The M&HCV sales during the corresponding period last year had grown marginally by 0.70 per cent to 22,528 units.

Overall, volumes in the CV segment increased by a moderate 4.37 per cent to 56,257 units in April driven by demand for light commercial vehicles (LCVs). LCVs account for two-thirds of overall commercial vehicle sales. Market leader Tata Motors volumes slipped by 9.62 per cent to 29,692 units.
The Society of Indian Automobile Manufacturers (SIAM) attributed the moderation in the growth in the CV segment to sluggish sales of medium and heavy commercial vehicles. This is largely on account of the higher excise duty that considerably raised the prices of commercial vehicles, according to Vishnu Mathur, SIAMs director-general. Consumers further postponed purchases expecting a reduction in excise duty, which happened a couple of days ago.

The government had increased excise duty by two per cent in the Budget. In his speech, Finance Minister Pranab Mukherjee also announced levying a special duty of three per cent on vehicles whose bodies are installed outside a manufacturers factory (by local vendors). On Tuesday, the overall additional levies of five per cent were reduced by one percentage point. Most of the companies had passed on the higher prices in the market -- a move that is expected to keep the demand low.

Among them is Tata Motors, which has said that this would, in the near term, impact sales. It usually takes four to six months to fully absorb the hike by the market, pointed out Ravi Pishrody, president (commercial vehicles business unit) of the company. Tata Motors had hiked prices of commercial vehicles between Rs 5,000 and Rs 60,000 across its range of models.

CV sales, a key indicator of economic activity, had grown by 18 per cent last financial year, but they are expected to just touch double-digit growth rate in 2012-13, weighed down by a not-so-impressive demand for medium- and heavy-duty vehicles. SIAM

has forecast a growth of 9-11 per cent for CVs in 2012-13. For the medium-and-heavy-duty vehicles, the association has predicted the growth at 5-7 per cent, while it expects the light vehicle category to grow at a faster pace at 14-16 per cent.

Mathur notes that the going will be tough in the first six months even in the passenger vehicle segment.

Passenger car sales in India witnessed its slowest growth during April in 10 years at 3.4 per cent, as customer sentiment remained low due to post-Budget price hikes and high interest rates.

Data available with SIAM show that domestic passenger car sales stood at 1,68,351 units in April 2012, compared to 1,62,813 units in the same month last year. The growth in last month was sober; it is the slowest for April in the last 10 years, revealed Mathur. The price hike that was done after the excise duty was raised in the Budget and high interest rates have affected consumers sentiment.

In April 2002, the auto industry had saw passenger car sales falling by 22 per cent, he added.

The total sales of vehicles across categories registered an increase of 10.01 per cent to 14,72,385 units in April as against 13,38,430 units in the same month last year.

The total two-wheeler sales last month increased by 10.94 per cent to 11,57,108 units from 10,43,010 units in April 2011. While motorcycle sales in the country grew by 6.54 per cent during the month to 8,61,602 units, scooter sales went up by 30.29 per cent to 2,27,924 units.

In the three-wheeler category, sales fell by 5.35 per cent to 31,986 units from 33,793 units in the same month last year.

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