August 2019 Car Sales – Snapshot

‘Turmoil’ is the term being used for the current state of the Indian Automotive Industry. However, we would want to say that the overall economy is going through a course correction and is a resultant of multiple Government policies – Demonetization, GST, Upcoming BS-6 Implementation to name the few. The way the slump in volumes is extending has put a lot of pressure on the OEMs, Auto Component Makers, Suppliers and Dealerships to rationalize cost and reduce inventories. The same has effected the blue collar jobs the most and has resulted in massive job losses across the channel. This course correction needs to stop at a particular point and the time is now! Any more extension in the slump can be ‘deadly’.

The Passenger Vehicle Industry saw a volume of 1,95,800 units in Aug’19 v/s a sale of 2,82,809 units in Aug’18 and reported a massive YoY degrowth of 30.8%! Surprising is the fact that the drop in volumes is even after adding the numbers of 2 new entrants – MG & Kia. It is clearly evident that both OEMs and Dealerships are correcting stock levels and are highly wary that any unsold stock by March 2020 shall have a negative impact on their respective profitabilities.

  • Kia makes a grand entry and sells 6,236 units in its first month! It already garnered a Market Share of 3.2% and exceeded the volumes of the likes of Renault, Ford, VW, MG, Nissan, Skoda & Jeep!
  • Maruti+Nexa loses the highest market share and the MS dropped by 3.9% to 47.6% in Aug’19. Maruti’s loss was Hyundai’s gain and Hyundai registered a Market Share of 19.5%!
  • The next biggest market share was seen for Tata Motors. The Wholesale has really taken a backseat and the Indian OEM is consistently losing numbers month after month. Even the much touted Harrier couldn’t garner the expected volumes for the OEM.
  • MG is gaining ground slowly and is consistently doing more numbers than Nissan, Skoda & FCA. MG should now be aligning its production capacity to meet the customer demand.

Market Shares figures for Aug’19 –

Electric Cars Taxation Structure in India

Government subsidy on premium passenger electric cars!

Without any cap on ex-showroom price, low GST rate of 5% on electric passenger cars is also working as subsidy on premium purchase. Incentivizing electric car is a step in right direction to control local level air pollution, but not for premium or luxury cars.

On 1st August 2019, Federal Indirect Tax body – GST Council, has reduced GST incidence on electric vehicles from 12% to 5%. Purpose of GST reduction is to create demand for electric car, which have zero tail pipe emission, through tax incentive. This is because current battery electric vehicles (BEV), are way too expensive than the conventional internal combustion engine (ICE). So, incentive has been put in place to bridge the cost barrier.

Case study

On 9th July 2019, Hyundai has launched Kona Electric SUV powered by a 136 PS electric motor, a 39.2kWh lithium-ion battery with ARAI certified range of 452km. It was Priced at ₹ 25.30 lakh and from 1st August 2019, price was reduced by 1,58,142 ₹ to 2,371,858 ₹, due to above mentioned GST revision.

To keep price competitive, Hyundai brings Kona electric to India as a CKD (completely-knocked-down) unit, and later assembles it at their Chennai plant, so it attracts lower custom duty in comparison to CBU (completely-built-up) unit.

Within Hyundai’s petrol SUV portfolio, Kona Electric is the most expensive, but the least taxed one, because of current GST structure.

As per current tax structure, cars longer than 4m in length are considered as symbol of conspicuous consumption and hence attract additional minimum cess of 15% over basic GST of 28%.

As Kona Electric is longer than 4m, so ideally, it should be in tax bracket of – 28% basic GST + 15% cess, just like other stable mates. Now, since governments (Central & State) wants to promote electric cars to control local level pollution, it is incurring GST revenue loss of roughly 8.6 lakhs ₹ on every Kona electric SUV sale.

This is just the tip of iceberg. Just imagine, if other luxury car makers starts bringing in their electric SUV through CKD route. So, here we tried to estimate the revenue loss governments (GST is shared among Central & State Government) will suffer.

These figures are staggering. To put things in perspective, till July 2019, Hyundai has dispatched 42 Kona Electric to dealers across India. Subsidy on these cars will be equivalent to cost of five lowest priced (including GST) electric buses, finalized for State Transport Unit through competitive bidding process.

Source : Page 9

Electric buses used for public transport will control air pollution at much larger scale than premium cars used for personal purpose. Subsidy on premium or luxury BEV can be better used for public transport BEV to amplify the benefits of BEV. Hence, Ministry of Finance needs to take urgent course correction.

Solution is not far away, all they have to do is to take a leaf out Department of Heavy Industry (Government of India), which is responsible for FAME II. In terms of incentive, FAME II scheme seems to be overall well calibrated, as it takes into account several factors, including cap on ex-factory price.

Source : page 10

15 Lakhs ₹ cap looks good. In 2018, as per estimates, almost 94% of cars were sold with a price tag (Ex-Showroom) of less than 15 Lakhs ₹.

This essentially shows, that the purchasing power of buyers is largely confined under 15 Lakh ₹. So, subsidizing anything above 15 lakhs will not lead to mass adoption, rather it will act as subsidizing premium or luxury products.

Though currently available BEV under 15 lakhs ₹, seems to be underpowered, with low driving range and seems to be less appealing (based on low respective-market segment share of their donor ICE car).

But aren’t they still good enough to be used for intra-city shared mobility, where average driving speed is still low (less than 30 kmph in most of the cases)?


Subsidy from tax payer’s money should always be meant for bigger cause and need to be well calibrated, and of course – never for conspicuous consumption. For electric vehicle GST rate, move to put a cap on ex-showroom price of EV, will also push automakers for localization (to prevent substitution of crude oil import with battery import in India), also, to come up with EV that are more affordable and thus suitable for mass adoption. Rather than having few niche products, mere for technology demonstration.

Potential electric car buyers seeking performance orientated cars don’t even need subsidy from Government.

Operational CO2 footprint of Kona Electric

In India, since Government and car companies do not provide CO2 emission data on their website, so, for our study we referred to data from the UK Government agency – Readers need to understand that the UK follows Euro6 emission norms, which is far more stringent than India’s current BS4 emission norms.

Since 75% (2017-18 – Source : electricity is generated by coal fired power station, electric cars drawing power form the grid will also have operational CO2 footprint. So here we calculated the operational CO2 emission equivalent if charged hypothetically from the Indian power grid, based on average CO2 emission of power plant that feeds electricity to Grid (gm/kWh).

Result is not quite encouraging. Specially, when we compared it with petrol (Euro6 compliant) i20 form UK. Hypothetically, if UK specific Kona electric draws electricity for charging battery from Indian Power Grid, it will have similar operational CO2 footprint as that of UK spec EU6 compliant Hyundai i20.

Data Source : 1) Electric energy consumption (Km/kWh) 2) CO2 Emission Equivalent – Indian Grid Electricity (gm/kWh)

Essentially, it is not solving the universal pollution conundrum in India, and just keeping air pollution in check at local level. But this is not Hyundai’s fault, as they don’t produce electricity in India. Rather it is a bold move on their part to introduce an electric car which has a good range, performance and keep air pollution in check at local level.

Tesla India Entry

On a side note, for those eagerly anticipating entry of Tesla in India, should also need to know, that Tesla shall be in a niche luxury segment (market size of 40,340 units in 2018), just like Apple iPhone in smart phone market. Hence, would be in reach of limited few, thus will not lead to mass adoption of BEV to control local level air pollution. So, Government needs to count on mass market carmakers (existing or new comers) for mass adoption of BEV in India.

Tesla is a pioneer, of not mere electric car, but also in several upcoming revolutionary technologies in automotive world.  And if you look from Tesla’s perspective, right now their plate is quite full, as they are struggling to make enough cars to meet demand in USA, Europe and most critical BEV market – China, where lies the real demand for BEV and opportunity to make profit, currently they are losing money on every car sale.

Business case is quite simple for Tesla, look at the graph below, which market is more attractive from luxury car demand perspective?

Market Size

Source :


Market segment : BEV

Especially, when Tesla makes only BEV.

Moreover, to overcome the high custom duty barrier (110% for CBU – originally meant to generate employment in India), to price the products competitively, they need to set up assembly unit (or to have contract manufacturing arrangement) for relatively insignificant volume in their larger global scheme of things.

Also, sourcing restriction on single brand retail (30% local sourcing – originally meant to generate employment in India), means their existing business model needs a lot of tweaking.

(The article is written by Rohan Rishi. You can connect with him at

The Curious Case of VW Polo – 10 years and counting in India!

Volkswagen had made the India debut of Polo during the 2010 Auto Expo. The car made a perfect case for VW to strengthen its hold in the hatchback-oriented Indian market and allowed many consumers to step in the VW brand with their purchases. The model had created new benchmark in terms of build quality and its automatic gearbox is still the favorite among the enthusiasts. Polo was also the first made-in-India car to receive a 4-star safety rating from Global NCAP, when the dual-airbag equipped variant was initially crash-tested in 2014 under the Safer Cars for India initiative.

Worldwide, Polo has sold over 14 million units and has been the best selling VW in India. Polo receives 45 percent of first-time buyers with a strong preference towards the GT TSI variant, which comes with  DSG gearbox.

Polo though started off really well in the Indian market; started losing ground year after year since 2011. The volumes has seen a consistent decline and the decelerating trend should really be a matter of concern for VW. Do note that VW has been able to sell 2,58,772 units of Polo since inception till date in the Indian market and the highest number of Polo’s sold in a month was 4,579 units (in January 2013).

Monthwise Sales Volumes - VW Polo
Monthwise Sales Volumes – VW Polo

A look at the yearly sales trend for the model –

Decelerating Volumes Year on Year for Polo
Decelerating Volumes Year on Year for Polo

So what really went wrong for the model –

  • No major product changes (exterior/interior) since inception. The refreshes that the model saw was minor and no significant changes seen till date when compared to the original 2010 offering.
  • VW Brand’s perception – The Total Cost of Ownership perceived for VW models were always higher. Higher cost of maintenance coupled with lower mileage figures proved heavy on the consumers pockets.
  • Lower Resale Value for the Polo further pulled down the brands acceptance.

Indian Car Sales Figures – July 2019

Modelwise Car Sales Figures for July’19 –

Segment Wise Sales Data – 

1. Entry Hatchback Segment:

2. Compact Hatchback Segment:

3. Premium Hatchback Segment:

4. Compact Sedan Segment:

5. Executive Sedan Segment:

6. Premium Sedan Segment:

7. Luxury Sedan Segment:

8. Compact SUV Segment:

9. Mid-SUV Segment:

10. Premium SUV Segment:

11. Lifestyle Offroader Segment:

12. MUV Segment:

13. Van Segment: