This week in Auto: New car demand skids, Hero seeks GST cut on two-wheelers

Revised axle load norms snuff out growth from CV

The new axle load norms approved by the government in the middle of last year has proved to be one of the main reasons behind the poor performance of commercial vehicles during the past few months.

Sales of medium and heavy commercial vehicles (MHCV), especially in the cargo segment, saw a 22 percent fall for India’s top four truck and bus manufacturers: Tata Motors, Ashok Leyland, VE Commercial Vehicles (VECV) and Mahindra & Mahindra (M&M).

Bike, scooter demand skid in December

Demand for new motorcycles and scooters slowed down significantly in December as three of the top five companies posted flat to negative growth in sales.

The four brands that announced their December sales numbers — Hero Motocorp, TVS Motor Company, Bajaj Auto and Royal Enfield — clocked only two percent growth at 8.77 lakh as against 8.59 lakh sold in the same month a year earlier. These companies control nearly 70 percent of the domestic two-wheeler market.

New car demand also skids in December

India’s four biggest car makers — Maruti Suzuki, Hyundai, Mahindra & Mahindra and Tata Motors — posted two percent growth in sales during December as dealers struggled to convert enquiries into confirmed bookings. The four companies control over 80 percent of the domestic car market.

Tight liquidity, increased lending rates, poor buyer sentiment and lack of new model launches impacted sales during December. This is despite a steady decline in fuel rates and unusually high discounts offered by all automakers and their dealers to get rid of inventory before entering 2019

Toyota wants to sell India-made Suzuki cars to the world

World’s largest car maker Toyota Motor Corporation is learning the tricks of the trade from one of the minnows and the learning is based majorly on the fastest growing automotive market in the world – India.

Toyota, which has collaborated with Suzuki for selling cars in India, intends to take the fruits of the partnership beyond Indian shores, into Africa and other similar markets.

Hero Motocorp demands reduction in GST on bikes

The country's largest two-wheeler maker, Hero Motocorp, called for reduction in Goods and Services Tax (GST) on bikes and scooters to 18 percent from the current rate of 28 percent.

The company, which ended last year with record sales of over 80 lakh units, said the reduction in tax would provide much-needed relief to two-wheeler customers across the country.

In a press release, company chairman Pawan Munjal even went to the extent of calling the two-wheeler "a lifeline for the cost-sensitive consumer". The release also highlighted the four percent drop in Hero Motocorp sales during December, the biggest drop amongst all (except Honda who is yet to announce its numbers) two-wheeler manufacturers.

A significant cut in GST is a must for the cost-sensitive buyer if the company wants to avoid a complete meltdown of that market. These buyers make up majority of the buying class of Hero Motocorp products.

Hero’s top-selling products such as Dawn and Splendor (both 100cc) are marketed to the economically weaker states of the country such as Rajasthan, Bihar, Uttar Pradesh, Madhya Pradesh and Orissa. Rural buyers form nearly half of Hero’s sales bouquet.

The automotive industry will brace for more than one upward revision in price over the next 15 months. These will be as a result of the new safety norms from April 1 this year and the new emission standard norms from April 1, 2020. A combination of these will likely result in an increase of a minimum of Rs 8,000 (almost 20 percent jump) in prices of budget (100cc) two-wheelers.

The budget bike segment is shrinking and, with that, the market share of Hero Motocorp too. One part of the market is shifting towards the premium bike segment (150cc and above), while the other is moving towards scooters. Hero Motocorp is weak in both segments despite several years of efforts to revive fortunes.

Therefore, Munjal’s plea for a GST cut has not resonated well with Hero’s peers.

Bajaj Auto is the leader in the premium bike segment where an added cost charge won’t drive buyers away. Similarly, Honda has been the unchallenged leader of the scooter segment. It believes that there is a long way to go before India reaches saturation in scooter demand, thereby assuring a constant flow of new demand.

It is true that tax on two-wheelers in India is one of the highest in the world. But with annual sales of more than 20 million without a GST cut, will the Finance Minister listen to Mr Munjal?