GST effect: car sales set to spurt as firms cut prices

With India adopting its biggest taxation reform, the Goods and Services Tax, from 1 July, car sales are expected to rise as major manufacturers have announced price cuts across their line-up.

The prices of some cars and two-wheeler prices fell on day two of the unified indirect tax regime on Sunday, and companies promised more cuts in the days and weeks to come as goods produced after 1 July hit the market.

The country's largest carmaker Maruti Suzuki reduced prices of some of its vehicles by 3 per cent on Saturday itself, passing on the benefit of lower taxes for certain segments of vehicles to consumers.

A South Delhi-based MSIL dealer told Businessworld, "Consumers have been asking us about a price cut for the past one month. Now the new price list is out, we are expecting demand to shoot up in the coming days." The dealer added that there is the significant increase in a number of enquiries in the first two days of GST.

The views were echoed by a Toyota Kirloskar dealer showroom. The showroom said that last month the company had reduced dispatches to showrooms to minimise financial burden and also consumers were expecting the price cut in two of its most popular models - Innova and Fortuner.

Japanese automotive giant Toyota slashed prices of its cars by up to 13 per cent, while New Delhi-based Hero MotoCorp reduced prices of two-wheelers by Rs400-4,000. Hyundai Motors, Tata Motors and Ford India are expected to unveil price cuts in the next few days.

Two-wheeler major TVS Motor too cut prices by up to Rs4,150 to pass on GST relief to buyers.

Toyota Kirloskar Motor announced slashing prices ranging between Rs10,500 and Rs2.17 lakh. The company said it has reduced prices of the Fortuner by up to Rs2.17 lakh, Innova Crysta by up to Rs98,500 and Corolla Altis by up to Rs92,500.

It has also lowered the prices of Platinum Etios by Rs24,500 and that of Etios Liva by up to Rs10,500.

N Raja, director and senior vice president, sales & marketing, Toyota Kirloskar Motor said, "GST implementation will be fruitful for the growth of the Indian auto industry. We think the industry will break into double-digit territory this year."

German luxury carmaker Mercedes Benz, which had passed GST benefit in the form of price cut on 26 May said that there is the significant increase in the number of queries for their cars.

Roland Folger, managing director and CEO, Mercedes-Benz India, said, "There may be initial teething issues but we are confident that there will be promising long-term gains. We are encouraged with the rising inquiries and increased footfall at our dealerships and are confident of continuing with our positive growth momentum."

Tata owned British luxury carmaker Jaguar Land Rover (JLR), which had already lowered prices due to currency fluctuation post-Brexit is expecting double-digit growth this year.

Rohit Suri, MD of Jaguar Land Rover brands in India, said, "On an average, on the basis of ex-showroom Delhi prices, the reduction in the prices of our vehicles across the range will be around 7 per cent."

He added that as prices become more attractive and more people seek to own brands like JLR, the market will surely expand.

Under the GST regime, four tax slabs - 5 per cent, 12 per cent, 18 per cent and 28 per cent have replaced an assortment of local, national and state-level taxes that has been blamed for inefficiency and corruption.