Car exports growth slips to six-year low at 2.6% in FY18

Volume seems to have been impacted post-GST

cars, vehicles
Ajay Modi New Delhi
Last Updated : Sep 27 2017 | 8:28 PM IST
Indian car exports, which expanded by 16 per cent in the last financial year, grew at a low single digit of 2.62 per cent during the April-August period, thanks to a decline seen by leading exporters like Hyundai and Nissan. Both are seeing a double-digit decline in shipments. 

Data from the Society of Indian Automobile Manufacturers show that export of passenger vehicles (cars, utility vehicles and vans) from India expanded just 2.62 per cent during the April-August period of the current financial year to 303,801 units. In the corresponding period of FY17, exports had grown 13.47 per cent to 296,148 vehicles. For the whole of FY17, the country did a record export of 758,830 units. 

Exports had grown 12 per cent during the April-July period this year. However, a sharp decline of 25 per cent in August has softened the growth rate to a low single digit. 

Almost all leading players like Ford, Hyundai, Volkswagen and Nissan posted a double-digit decline in shipments last month. 

Ford, which recently emerged as the biggest exporter after overtaking Hyundai, saw a 55 per cent dip in exports last month to 7,963 vehicles. "We had a supplier-related issue specific to transmission, which impacted domestic volumes as well as exports in August. The same is getting normalised and is not yet to optimum standards. We would not be able to share the details of the September shipments in advance," said a company spokesperson. As things stand, the company may post a decline in September as well. 

Korean car maker Hyundai, the second-biggest player, saw shipments decline by 22 per cent last month to 12,802 units. The company, which is also the second-biggest carmaker in the domestic market, has said it is bringing down exports to cater to domestic demand against the backdrop of capacity constraints. In the April-August period, Hyundai has seen a drop of 18 per cent in exports. Like Hyundai, Nissan is also faced with declining export sales. In August, it saw a decline of over 24 per cent while April-August volume is down 31 per cent to 25,809 vehicles.

German car maker Volkswagen did not respond to queries on export decline in August when volumes contracted by 14 per cent to 6,469 units. Export is a major driver of revenue for a number of global car makers operating in the Indian market. A number of them (Ford, Volkswagen and Nissan) sell more vehicles via exports than in the domestic market. 

Some impact on exports could also have come the introduction of goods and services tax (GST) from July as companies are required to block funds for payment of cess while undertaking exports. Exporters have the option of shipping cars without paying a GST or cess against a bond or letter of undertaking but this is seen as a complicated process. Most companies, therefore, prefer to pay GST out of the input tax credit pool and claim a refund later. The challenge has come from the cess part, which in this case should be paid in cash. This cess is as high as 22 per cent in case of sport utility vehicles and 17 per cent for mid-size cars. Getting a refund could take a few months, leading to cash flow problems for exporters.
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