Reduced prices post GST set to increase the demand for cars

GURGAON: Demand for passenger vehicles went up by about 7% in Haryana in the previous financial year and is expected to increase after the goods and services tax reduced prices. The country’s automakers sold over 168,000 vehicles in the state in 2016-17 compared with 157,000 units a year earlier, according to industry estimates.

Sales of passenger vehicles in Haryana had dropped 2% in 2015-16 after the Supreme Court banned registration of larger diesel vehicles in the National Capital Region for eight months, starting December 2015, as part of measures to combat pollution.

“The decline in sales was clearly on account of the diesel ban. Even after it was lifted, customers were uncertain and held back purchases of diesel utility vehicles because of which passenger vehicle sales grew at a moderate pace last fiscal,” said Abdul Majeed, a partner at PricewaterhouseCoopers. With prices of utility vehicles reducing after GST was implemented from July 1, sales are expected to gain pace over the next few months.

“Haryana is a large market for SUVs. Now that prices of utility vehicles have come down post-GST, demand should pick up further in the coming months,” Majeed said. According to industry estimates, the state accounts for 8-12% of the utility vehicles sold by the nation’s automakers. Haryana had a 5.5% share of the total number of passenger vehicles sold in the country in 2016-17.

Utility vehicles emerged as the biggest beneficiary under GST among cars and have become 7-12% cheaper, depending on the state. While mid-size sedans attracted 24% excise duty in the previous regime, levy on SUVs was 30%. As per the new structure under GST, a uniform rate of 28% has been levied on all vehicles, with an additional cess of 15% on those exceeding 4 metres in length, bringing down the total tax incidence on larger vehicles. The Indian utility vehicle segment has been the fastest growing among passenger vehicles. Led by Maruti Suzuki’s Vitara Brezza and Hyundai’s Creta, the utility vehicle segment grew 30% in FY17 and accounted for almost a fourth of the overall passenger vehicle market.

Experts said annual sales of utility vehicles is set to cross 1 million units within a couple of years and Haryana and other parts of the NCR would be major contributors.