Why car sale figures of June 2018 flatter to deceive

The increased sales figures posted by the Indian auto companies depict a cheerful picture. But, the main reason behind such higher sales this June was weaker demand in June 2017.

By Mudit Kapoor  
Monday, July 2, 2018

Nifty Auto opened 1.03 per cent higher on Monday, backed by robust sales figures for June 2018 posted by the automobile companies. Stocks of Mahindra & Mahindra, Tata Motors, Maruti Suzuki and Eicher motors also opened on a higher note at 1.30 per cent, 2.49 per cent, 0.72 per cent and 1.54 per cent, respectively.

The increased sales figures posted by the Indian auto companies depict a cheerful picture. But, the main reason behind the higher sales this June was  weaker demand in June 2017 due to two main factors.

Firstly, the Supreme Court had mandated adoption of BS IV to improve environmental conditions. The BS IV was applicable from April 1, 2017, following which the auto industry had to revamp their manufacturing line-up to incorporate such changes.

The second factor that hit sales last year was the uncertainty over the GST rollout. The car makers willingly controlled supply to dealers to minimise losses arising out of transition to Goods and Service Tax regime.

The drop in demand and supply of automobiles in June 2017 led to low base effect. But, the growth in economy has also helped the figures shine this year, according to automakers.

"This year, the continued growth in June 2018 is on the back of the economy continuing to show an uptick due to the improved industrial activity, robust demand in private consumption and government spending on infrastructure," Tata Motors said in a filing with SEBI. Following are the disclosures made to SEBI by Indian auto enterprises:

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