India's New-Car Sales Sputter 9% in June

India's sales of new passenger and commercial vehicles fell 9% in June year on year as automakers held off shipments and consumers withheld purchases ahead of the rollout of the nationwide goods and services tax in July.

June's figures represent the first drop in six months, with 13 out of 16 automakers seeing sparse sales, based on data from the Society of Indian Automobile Manufacturers. Sales retreated last November and December after the demonetization of the country's two largest bank notes, but had recovered since January. This was the largest drop in new-car sales since a 13% plunge in April 2014.

Passenger car sales skidded 11% to 198,399 units, the first such decline since a 13% tumble in March 2013. Meanwhile, sales of commercial vehicles edged up 1% to 56,890 units, the first increase in three months.

India's GST came into force July 1, combining different taxation systems from each state into a uniform scheme. Taxes on many vehicle types have been effectively lowered a few percent as a result. Automakers held off shipments in June because stock delivered under the old tax system and sold after the implementation of the GST would likely result in losses from differing rates. Consumers were hesitant to buy, preferring to weigh the benefits and drawbacks of the GST first.

Maruti Suzuki India's new-car sales ticked up 1%, but the result is still a significant slowdown from the 15% sales growth seen in May. "Every automotive manufacturer [including Maruti Suzuki] tried to reduce the stock," said R.S. Kalsi, executive director of marketing and sales at the automaker, adding that demand is firm. Honda Motor and Czech automaker Skoda posted sales gains of 12% and 2%, respectively.

Of the remaining 13 companies, many experienced double-digit dives. The biggest was Toyota Motor's 85% plunge on sales of just 1,973 units, compared with 10,914 in May. "The uncertainty surrounding the GST implementation with regard to passenger vehicles has impacted retail sales as customers put off purchasing until after the GST rollout," said N. Raja, director and senior vice president at Toyota Kirloskar Motor. Raja is hoping for a recovery starting this month, once prices are lowered thanks to the GST's effective tax decrease.

On the other hand, the modest rise in commercial vehicle sales in June may indicate a recovery from tougher emissions regulations that went into effect in April. In the April-June quarter, passenger car sales increased 4% while commercial vehicle sales fell 9%.

The impact of the GST on motorcycle sales has been limited. June sales rose 4% to 1,527,094 units. Hero MotoCorp, the country's largest maker, saw sales climb 14%. Sales at Honda, the country's No.2 manufacturer, edged up 2%.