Car Sales Skyrocket with GST 2.0 Launch
The launch of GST 2.0 in India has created an unprecedented wave of activity in the automotive sector. On its very first day, Maruti Suzuki reported a staggering 80,000 enquiries and delivered 25,000 cars, a remarkable achievement that the company claims it hasn’t experienced in over three decades. Tata Motors also witnessed significant engagement with more than 25,000 enquiries and 10,000 deliveries, showcasing the potential of the new tax regime.
This surge in activity is attributed to several factors. The end of the Shraadh period, a time traditionally associated with mourning in Hindu culture, has lifted consumer sentiment, allowing buyers to consider new purchases. Additionally, pent-up demand has been a driving force, as many consumers had deferred their buying decisions in anticipation of GST 2.0, hoping for reduced tax rates.
The changes introduced under GST 2.0 have made small cars more affordable, as vehicles under certain specifications now fall into the 18% tax slab, significantly reduced from the previous 28% plus cess. This reduction is expected to encourage more buyers, especially those transitioning from two-wheelers to four-wheelers. Maruti Suzuki’s head of marketing, Partho Banerjee, noted that the response has been phenomenal, with daily bookings surging to 15,000, which is about 50% higher than usual.
However, the road to recovery has not been entirely smooth. Before the launch of GST 2.0, showrooms were relatively empty, as dealers anticipated deep discounts that would follow the tax rate changes. Unfortunately, transitional issues meant that many dealers faced challenges in passing on the benefits fully to consumers, leading to initial disappointment. Some dealers expressed concerns about potential losses due to the stock they had accumulated before the tax changes.
Interestingly, while the GST overhaul has positively impacted vehicle pricing, it has also highlighted the challenges faced by dealers who had already purchased stock at older rates. The Federation of Automobile Dealers Association (FADA) raised alarms about the anxiety felt by dealerships regarding their financial stability in light of these changes.
Despite these hurdles, the growth in demand for small cars is a silver lining. This segment has struggled in recent years, but with the new tax benefits, it is making a comeback. As more families look to purchase their first car, the hope is that GST 2.0 will provide the necessary boost to an industry that is vital to India’s economic growth.
