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Demonetisation puts brakes on automobile sales

G BALACHANDAR Chennai | Updated on January 15, 2018

While car and two-wheeler makers see this as a temporary blip, some fear the constrained liquidity might spoil year-end sales too   -  NAGARA GOPAL

Car and two-wheeler sales have been hit since the Centre’s ban on ₹ 500 and ₹1,000 currency notes. The currency ban came as a shocker for the auto sector, which was hoping to sustain the momentum of festive sales, as also the revival in rural demand on the back of a healthy monsoon.

While none of the car or two-wheeler makers made an official confirmation, dealers admitted that there had been slow down in sales as the number of walk-in customers has dropped significantly.

However, an official of a top car maker’s dealer in Chennai said: “We used to see 10-20 customers walking in and we could convert at least three of them into buyers. After the currency ban, the number has definitely dwindled. While there is no issue with the salaried class of customers, who keep walking into the dealers’ showrooms, there has been a significant drop in other categories of customers such as self-employed, real estate people and other traders.

Some people pay upto ₹2 lakh in cash for their new vehicle purchases. But now, those people will have difficulty in making the initial payment in cash, pointed out a car dealer.

It has also been gathered that only some dealers still accept the old notes, while others are not taking it fearing that they might be grilled by authorities later.

The slowdown appears to be severe in rural areas where vehicle purchases, particularly two wheelers, are cash-driven. Sales of bikes have been hit due to the temporary liquidity issues caused by the restrictions on cash transactions. This shock comes after a recovery in bike sales in the first half of this fiscal.

Any slowdown in rural areas will have a bearing on bike sales as rural markets account for close to two-thirds of entry motorcycle sales in the country.

Though a good monsoon is a key factor in spurring sales, sentiments also play a vital role in these markets.

While car and two wheeler makers see this as a temporary blip, some fear that constrained liquidity might spoil the year end sales too.

Industry analysts, with whom BusinessLine spoke, admitted that the demonetisation would see some short-term impact on the sales cars, SUVs and two wheelers.

Published on November 17, 2016

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