SIAM sought a stimulus package similar to the one given during the 2008-09 downturn, stating the industry is "now entering a desperate situation"

Car sales in India declined by 18.56 per cent in August this year, the biggest drop in 10 months, prompting industry body Society of Indian Automobile Manufacturers (SIAM) to seek cut in excise duty from the government.

With exports also posting the highest decline in more than 11 years, falling 26.83 per cent during the month, SIAM also sought a stimulus package similar to the one given during the 2008-09 downturn, stating the industry is “now entering a desperate situation”.

The overall vehicle sales in the country also registered a drop of 3.9 per cent to 13,54,436 units in August this year, the biggest decline in more than three and half years.

According to the latest SIAM figures, domestic cars sales in August stood at 1,18,142 units compared to 1,45,066 units in the same month last year, down 18.56 per cent. The rate of decline is the highest since October 2011.

“This is the time when wholesale numbers should be picking up as dealers stock-up to meet festive season demand, but this has not happened. We are entering a desperate situation. We need help from the government,” SIAM Senior Director Sugato Sen told reporters here.

He said the excise duty on automobiles, which was increased in this year’s Budget, needs to be reduced, particularly for the commercial vehicles segment.

Car exports during the month stood at 36,104 units, down 26.83 per cent. The previous lowest decline in exports was recorded in March 2001, when overseas shipments dropped by 48.37 per cent to just 2,221 units.

“The decline in exports has also affected the overall production of the companies here in India,” he said.

In this year’s Budget, excise duty on small cars was hiked to 12 per cent from 10 per cent. For petrol cars with engines under 1,200 cc and diesel cars with engine capacity under 1,500 cc, but the length exceeding four metres were increased to 24 per cent from 22 per cent and a fixed duty of Rs 15,000.

Petrol and diesel driven vehicles having length exceeding four metres and engine capacity of over 1,200 cc and 1,500 cc respectively were charged with an ad valorem duty of 27 per cent, instead of the earlier 22 per cent and a fixed duty of Rs 15,000.

“The two-wheeler industry is also suffering. The last decline happened in January 2009 when sales dropped by 3.95 per cent,” Sen said, adding factors like high petrol price and interest rates were keeping customers away.

In the motorcycle segment, market leader Hero MotoCorp posted 15.34 per cent fall in sales to 3,88,903 units in August. Rival Bajaj Auto’s sales went down by 13.89 per cent to 1,95,093 units.

The scooter segment’s overall sales grew by 9.95 per cent to 2,33,180 units from 2,12,077 units.

In the three- wheeler category, sales went down marginally to 45,386 units from 45,468 units in the same month last year.

The month-long lockout at Maruti Suzuki’s Manesar plant from July 21 too impacted the industry’s numbers last month.

Mr Sen, however, said this was not the sole reason for the decline in car sales as the overall market is down due to high interest rates and fuel prices along with inflationary pressure. “The drop of nearly 19 per cent for the industry is too big for a single company to make up,” he said.

During the 2008-09 downturn, the government had provided a stimulus package by reducing CENVAT by 4 per cent. For the commercial vehicles segment, public sector banks were allowed to provide line of credit to NBFCs on new purchases and one-time assistance under Jawaharlal Nehru National Urban Renewal Mission to purchase busses for urban transportation.