Riding on the GST cuts, carmaker Maruti Suzuki saw sales of small cars zoom in October. Chairman RC Bhargava said that the perception that “aspirations of all Indians have changed, and that nobody wants to buy small cars” had been proved “incorrect”.
The belief that “the market has moved up to bigger and more luxurious cars has been proved to be an incorrect perception,” he said.
Bhargava told news agency Reuters he expects a larger growth in the company’s small car sales compared to SUVs following the Goods and Services Tax (GST) reforms, that kicked in effective September 22.
With the GST rate rationalisation, the taxes on small cars fell to 18 per cent from 28 per cent. These are vehicles with engine capacities not exceeding 1200 cc (for petrol) and 1500 cc (for diesel) and with length of not more than 4 metres.
On the other hand, the taxes on larger vehicles increased to 40 per cent, with additional compensation cess of 17-22 per cent, taking the total tax to 50 per cent in some cases.
Citing sales performance of October, the first full month after the new GST rates came into effect, Bhargava said: “Our retail sales growth in the ’18 per cent GST’ category grew by 30 per cent. Big cars have also grown by around 4-5 per cent. Overall, we have seen a growth of 20 per cent in retails.” This just shows that there were a lot of people wanting to buy small cars, he asserted.
Hyundai Motor India Ltd is among the manufacturers that maintained that due to changing aspirations, consumers have moved away from small cars and hatchbacks to smaller SUVs such as Exter and Tata Punch, which have also benefited from the 18 per cent GST rate.
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On the very first day the new GST regime kicked in on Monday (September 22), Maruti Suzuki reported a record 80,000 enquiries and 25,000 car deliveres. In comparison, rival automaker Tata Motors saw around 25,000 enquiries and 10,000 deliveries.
Following the development, Partho Banerjee, head of marketing and sales for Maruti Suzuki, had noted: “Demand for small cars has been especially strong, with bookings growing by nearly 50 per cent. Enquiries remain very high, and we may even run out of stock for certain variants. Dealers are staying open late into the night to deliver cars to customers. Compared to last year, the overall response has been exceptionally strong.”
The new GST regime, which came into effect on September 22, replaced the four-slab system (5 per cent, 12 per cent, 18 per cent, 28 per cent) with a two-slab system (5 per cent, 18 per cent), reducing the burden on customers and boosting transactions and economic activity in a wide range of sectors related to essentials, consumer goods, and services.
(With inputs from PTI, Reuters)
