Car makers continue to see a growth in bookings and enquiries from customers in spite of an increase of up to seven per cent in cess more than a week ago. Manufacturers said the current demand is aided by the festive season and any negative impact of the cess may not be visible before November.
"The increase in cess is lower than what the manufacturers and customers were anticipating. We continue to see a growth and pickup in demand even after the cess turned effective from September 11. However, we are not sure if this trend will continue when the festive demand drops by end of October," said N Raja, director and senior vice-president (sales & marketing) at Toyota.
About 90 per cent of Toyota's product portfolio has been impacted by the government's decision to hike cess on certain cars after announcing the first set of tax rates under the GST.
It was widely expected that the GST Council will hike cess by 10 per cent on sedans and sports utility vehicles (SUV). However, the Council decided to cap the increase at seven per cent while imposing a lower cess of two and five per cent on certain categories of vehicles. Toyota had to increase the price of its best-seller Innova by Rs 80,000-100,000 (five per cent) and Fortuner by Rs 150,000 (seven per cent). The Etios sedan turned expensive by two per cent. These three products bring 90 per cent of sales for the Japanese carmaker.
The festive season in most states of the country begins from Thursday with Navratri and continues till the Dussehra on September 30. Demand is expected to continue next month owing to Diwali. Car makers have been rolling out steep discounts and benefits to buyers in a bid to keep the sales momentum strong as many buyers advanced purchases to escape the impact of cess.
Rakesh Srivastava, director (sales and marketing) at Hyundai said there is a price sensitivity among buyers in spite of the high sales promotional offers in the market. "We will have to watch the sales this festive season to get a clearer outlook on the overall trend in the industry", he said. Hyundai's popular models like Elitei20, Creta and new Verna saw a price increase post the additional cess.
Luxury car brands, however, seem to be more impacted compared to mass market players owing to the increase in cess. Most luxury vehicles now attract an additional cess of seven per cent. Gurmeet Singh Anand, managing director at AMP Group, sole dealership for Jaguar Land Rover in the NCR, said his business is almost at a 'standstill' and sentiments are weak among luxury car buyers. The luxury car segment forms one per cent of the three-million-unit domestic car market.
The domestic passenger vehicle (cars, vans and utility vehicles) industry has seen its sales grow by 8.67 per cent to 1.32 million units during the April-August period of FY18. In August, car makers reported a near 14 per cent growth in sales to dealers and a double-digit growth is expected in September as well. The industry is expected to close the year with a high single-digit growth.