India new vehicle sales down 18% to nearly two-year low; industry sees pickup after Q3

NEW DELHI, NNA – New vehicle sales in India fell 18.4 percent to 308,194 units in May, posting the seventh straight year-on-year decline and slipping to the lowest level since July 2017, hit by restricted non-bank lending and higher insurance premiums.

Data released Tuesday by the Society of Indian Automobile Manufacturers (SIAM) also showed that passenger car makers slashed production for the seventh straight month in May to draw down inventories amid sluggish consumer appetite.

Key points:

-- Passenger vehicle sales plunged 20.5 percent to 239,347 units in May, marking the sharpest drop since 31.4 percent in September 2001. Sales have been falling since July last year, except for October.

-- Vehicle production dipped 11.9 percent to 396,102 units, below the key 400,000 level for the first time in five months. Passenger vehicle production fell 12.2 percent to 315,168 units.

-- Indian automobile exports slipped 6.8 percent to 63,119 units in May, posting the first year-on-year drop in two months.

Takeaway:

-- Car sales data indicate consumer spending remains sluggish in the April-June quarter, boding ill for GDP growth. Vishnu Mathur, director general of SIAM, the industry group, told news media that sales were unlikely to pick up until after the July-September quarter, adding that there may be rush purchases before tougher emission control takes effect next April. He urged the government to lower the goods and services tax on new car purchases and to introduce a regulation to phase out old cars.

-- India’s economic growth decelerated sharply to a five-year low in the January-March quarter, also taking GDP expansion for the last fiscal year to the lowest since 2014, amid a domestic cash liquidity squeeze and global slowdown.

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