September car sales up, will it continue? - Views on News from Equitymaster

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September car sales up, will it continue?

Oct 4, 2000

For the month of September 2000 car sales have reported buoyant growth rates than as compared to the dull performance of the past few months. The main reason behind this is the fact that companies buy cars in September so as to claim depreciation for the rest of the year. They manage to reduce their tax burden for the first half of the year by doing so.

Car Companies Sep-00 Sep-99 % growth
Maruti Udyog 36,959 34,938 5.8%
Daewoo Motors 4,720 3,166 49.1%
Hyundai 8,242 7,214 14.3%
Honda Siel 1,101 1,000 10.1%
This is a trend every year wherein car sales tend to pick up in the month of September, due to the above. Besides this the beginning of the festive season could also have added to the volume growth.

Passenger car sales have been pretty dull over the past few months due to the uniform sales tax across all states resulting in higher prices in certain states as well as overall inventory build up. Infact on year on year basis, car sales actually declined in July and August 2000.

As October is the beginning of the festive season, this upward trend may have continued in the second half as buyers are expected to make fresh purchases. However the recent diesel and petrol hikes would act as a dampener on the automobile segment as a whole and to the car segment as well.

This together with the industrial slowdown could result in a lull in the passenger car segment for the rest of the year. Hence the buoyant car sales in the month of September are not as positive as they seem for the passenger car segment, as car sales do tend to pick up every year in this month due to tax planning by companies.

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