Ban on Rs 500, 1,000 notes to impact 2-wheelers, SUVs, premium vehicle sales

Rajalakshmi S | | Updated on: Nov 09, 2016
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The government’s ban on the use of Rs.500 and Rs.1,000 notes is likely to have an impact on the sales of two-wheelers, SUVs and premium vehicles as these segments transact heavily through cash.

Given that the rural market accounts for a significant share of two-wheeler volumes (motorcycles) and a substantial portion of sales happens through cash, the curb on currency notes is likely to pull down the sales.

It is learnt that 35-40 per cent of the prices of SUVs and premium vehicles are paid through cash. Black economy gets heavily invested in SUVs and premium vehicles. Hence, these categories will also face the heat in the short term.

However, small car segment may be spared as bulk of the sales happen through loans.

“I think the move will have an impact on two-wheeler segment definitely. Also, there will be impact on SUVs, premium vehicles and second-hand car sales. Because these are the areas where more cash transactions happen,” Abdul Majeed, Partner-Price Waterhouse told BusinessLine .

But, small car segment, according to Majeed, may not see big impact as most of the transactions happen through bank financing or other loans.

“I don’t see any big impact on small car sales as a consequence of the currency notes ban. But a lot of people are not too sure about the GST rate structure, definition and cess. So, GST uncertainty may have some impact on small car sales over the next few months,” he added.

A senior official of a leading two-wheeler firm also admitted that the ban will impact the bike sales, particularly in rural areas.

It may be noted that two-wheelers and SUVs had strong growth during the first half of this fiscal. While utility vehicles reported a whopping 40 per cent growth in sales in the first half, good monsoon helped revive demand for motorcycles, particularly in rural areas and the segment reported 13 per cent growth after being in the negative lane in the previous fiscal.

Published on January 15, 2018

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