GST Effect: June car sales to be down, July should hit record numbers

Now that GST is all set to be a midnight saga, car manufacturers have carved out a strategy that will ensure minimal effect on the dealers while keeping an eye on the annual targets nonetheless. As a result, since SIAM provides us with wholesale numbers only, June might be the slowest in the last decade while July might set new records.

The primary issue that both the dealers and the manufacturers are facing right now is that the tax credits of the existing tax structure will not be carried forward to the GST regime. The government says that while this will create issues in the short term, the effects will get nullified in the long term with no real difference to the end customer.

For big ticket purchases like cars, the immediate effects are considerable and hence car manufacturers have devised a strategy to circumvent the issue. Car manufacturers have stopped despatching cars to dealers earlier this month to help them clear their stocks before the onset of GST. Car dealers, on an average, maintain stocks enough for a month, which is the reason why many of them are offering discounts to clear their stocks before the end of the month.

This should certainly result in a spike in retail sales in the month of June but unfortunately, we will not be able to find out how much. The sales numbers published by carmakers are wholesale sales and since OEMs haven’t despatched cars for the better part of June, the sales numbers should ideally show a sharp dip. The wholesale numbers for July will be high as the manufacturer will push the July stock as well as make up for its June numbers. The sales trend is expected to normalise by August with the new GST compliant prices in effect.