The Federation of Automobile Dealers Associations (FADA) has called for a cut i n goods and services tax (GST) rate on vehicles to 18% from 28% to revive demand, pointing out that despite the onset of festive season earlier this week, there has not been any significant improvement in enquiries and sales at automobile showrooms across the country.
Ahead of the meeting of the GST Council in Goa on September 20, the federation said that GST on vehicles must be reduced, even if temporarily, to spur demand. Automobile sales have fallen consistently in the past few months as an increase in vehicle ownership costs amid slowing economic activity put off customers.
“The situation has not changed on the ground. There are some enquiries but customers are still deferring purchase decisions,” FADA president Ashish Kale told media persons a day ahead of FADA’s Auto Retail Conclave scheduled to take place in Delhi on Wednesday.
Kale further said, “We will get to know by the end of the month if the measures announced by the government are helping (revive demand)… In terms of discounts, automakers have done whatever they can. If GST also goes down, then affordability of vehicles will improve significantly.”
Dealers said that conversion rates, from enquiries to sales, had nearly halved from 8-15%, depending on the brand, in recent months.
Auto dealers usually stock up in August to cater to increased demand from customers during the festive season in September and October. With inventory lying unsold at stockyards and in showrooms this year, manufacturers and dealers are instead focusing on pushing retail sales to liquidate stocks before more stringent BS-VI emission norms kick in next year.
“Dealers are not stocking up like they usually do ahead of the festive season,” said Kale. “We are cautiously optimistic that market sentiments will improve on account of the announcements made by the government last month. We have to wait and watch for now… It is important that inventory levels are kept low after the festive months because BS-VI norms will get implemented next year.”
As of July, inventory levels of passenger vehicles, commercial vehicles and two-wheelers stood at 25-30 days, 55-60 days and 60-65 days, respectively.