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Extension of excise duty cut drives auto sales
July, 11th 2014

Improved sentiments, aided by an excise duty cut extension, fuelled sales of passenger cars in June, according to industry body Society of Indian Automobile Manufacturers (SIAM).

Total passenger car sales grew 15 per cent to 1.6 lakh units during the month, the highest ever June sales recorded by the industry, compared with around 1.4 lakh units in June 2013, the latest SIAM report said.

Double-digit growth

“The positive sentiments created by formation of a stable Government and extension of excise duty reduction have helped the passenger car sales post double- digit growth in June after 10 months,” Vikram Kirloskar, President, SIAM, told reporters here.

According to Vishnu Mathur, Director-General, SIAM, this was the highest ever June sales and the industry hopes this trend will continue.

Mathur also attributed the positive sales trend to the Government extending excise duty cuts on cars till the year-end.

Besides the duty cut, banks opening up to lending for car purchases has also helped automakers post better says, according to analysts. “Demand from rural areas is also picking up. But the only problem the industry might face is the impact of the monsoon, which is not at optimum yet,” said Abdul Majeed, Partner at PriceWaterhouse.

Rising rural demand

If the Government speeds up infrastructure development, the positive sentiments could continue, especially for commercial vehicles, he added.

These vehicles are still in the negative zone because when the economy grows, the passenger car sales get better immediately, but not commercial vehicles, as these depend on freight demand, Majeed said.

With the festive season slated to kick in soon, analysts are hopeful of better vehicle sales. “Discounts and sales incentives are likely to continue for the next couple of months as companies try to ramp up capacity utilisation while balancing their inventories,” said Rakesh Batra, Partner and National Leader - Automotive Practice, EY.

According to SIAM, total passenger vehicle sales grew 11 per cent to 2.19 lakh units in June against 1.96 lakh units in the year-ago month.

Two-wheeler segment

In the two-wheeler segment, sales grew 13 per cent to 12.61 lakh units, compared with 11.16 lakh units in June 2013. Three-wheeler sales also grew 23 per cent to 47,348 units in June, against 38,417 units in June last year.

However, total commercial vehicle sales are still in negative (-9 per cent) zone year-on-year at 51,119 units during June, against 56,194 units in June 2013. Overall, the grand total of all vehicles sold during June grew 12 per cent to 15.78 lakh units, compared with 14.07 lakh units in corresponding month last year.

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