Despite positive July sales growth recorded by few passenger carmakers, aggregate Indian car sales in the fiscal year 2020-21 will fall to an 11-year low in absolute terms, the Society of Indian Automobile Manufacturers (SIAM) has warned in internal communications to the government.
Pointing out that the industry is currently operating at 50 percent or best at 60 percent capacity utilization, the industry will be able to sell a maximum of 1.91 million units (cars, utility vehicles, sports utility vehicles and vans) in the fiscal year 2020-21, lower than the 1.95 million units sold in FY 2009-10, SIAM said.
According to SIAM, even though there have been signs of demand stabilizing in July this year, with a few manufacturers reporting positive sales compared to the corresponding month of the previous year, the numbers are expected to see sharp dips as the market is expected to lose momentum going forward during the rest of the current fiscal year.
In its communication to the government, SIAM has sought a reduction to the Goods and Service Tax (GST) on automobiles to 10 percent and an incentive-based scrappage policy which will prompt customers to replace older vehicles.
Pointing out that the current GST on vehicles ranges between 20 percent and 68 percent depending on categories, the profitability of automobile manufacturers currently ranges between three percent and nine percent, underlining the importance of lowering rates of taxes to boost demand in the market, SIAM said.