This festive season is not proving to be sparkling for the luxury car market, blame it on GST

This festive season is not proving to be sparkling for the luxury car market, blame it on GST The sales of automobile usually are at peak at this time of the year as people buy automobiles during this festive season. Luxury car’s sales, however, are dealing with a large number of customers who are delaying their buying decision because of the uncertainty surrounding the goods and service tax (GST).

Sales estimates are being pruned by many company executives. Earlier, they were estimated to be expanded by double digit.

The festive season typically accounts for 30% of annual car sales.

GST council is set to meet again in the first half of November and till then sales of automobiles sector are going to be low. GST however, is expected to be set at 26% for the auto sector, which should reduce the prices of luxury cars that at present attracts as 52% in taxes under various heads. This is the sole reason why people are delaying their buying decision.

An executive at a super luxury car company said that several potential customers have declared their unaccounted cash under the recently closed income declaration scheme and don’t have money to splurge now or are cautious on spending. Others are avoiding big purchases so as to stay off the taxman’s radar.


"There are lot of uncertainties regarding the future of diesel as a fuel in luxury cars and the impending GST tax structure, so one expects the growth forecast for Q4 to be slightly lower with customers deferring purchase," Roland Folger, managing director of Mercedes-Benz India told ET.

Luxury car market is said to have expanded 3-5% to about 26,000-28,000 units, in the first nine months of 2016 which was largely driven by double-digit growth at BMW, Jaguar Land Rover and Volvo which were aided by new launches. Audi and Mercedes-Benz have posted a disappointing low single-digit growth.

“It isn't unusual for consumers to wait and watch when they expect major changes in taxes, especially when it comes to the purchase of big-ticket items such as luxury cars. But the problem this time is that it is happening at the peak festival time,” said Gaurav Vangaal, senior analyst at IHS Markit Automotive.

Industry players are now hoping that the final tax rate doesn't create any major roadblock to the demand situation.