Demonetisation At Work: Two-Wheelers, Commercial Vehicles Worst Hit In November
People are postponing purchases, and the impact is most visible in rural areas: SIAM
Crippled by the government’s move to demonetise old Rs 500 and Rs 1,000 currency notes, domestic vehicle sales for the month of November contracted 5.5 percent from the same month last year. The magnitude of the decline in retail sales is still only partially visible since wholesale numbers typically have a lag of about a fortnight.
Total domestic vehicle sales fell by nearly 1 lakh units to 15.64 lakh units in November.
The Society of Indian Automobile Manufacturers attributed the sudden drop in sales to the demonetisation, but added that November 2015 was a festive month whereas festivals ended in October this year.
Passenger car sales were flat at 1,73,606 units versus 1,73,111 units sold a year ago. But this was largely thanks to some recent launches that continue to command a waiting period running into months, which meant despatches haven’t slowed down, just yet, said SIAM Director General Vishnu Mathur.
The country’s biggest carmaker, Maruti Suzuki India Ltd., had launched its Baleno hatchback and Vitara Brezza compact sport utility vehicle in 2016, while Tata Motors Ltd. launched its Tiago hatchback recently. Each of these models currently have a long delivery backlog.
There was no such luck, for commercial vehicles, with a drop of 11.6 percent during the month gone by. at 45,773 units.
The demonetisation hit the two-wheeler segment the hardest, which had been witnessing a steady growth for months now. Motorcycle sales, the single largest category in terms of volume, plummeted 10.2 percent during the month of November to 7,78,178 units, while sales of scooters were also down 1.8 percent at 3,88,692 units.
The two-wheeler category was hit the worst, as a sizable portion of the sales come from the rural markets, where most dealings are done in cash. The shortage of cash appears to have changed priorities of the common man to more essential commodities, with vehicle purchases being postponed, Mathur said.
Exports rose modestly during the month. Indian automakers shipped overseas a total of 2,85,462 vehicles, up 3.4 percent on year.
Forecast For December
The month of December is typically a slow month in terms of vehicle sales, as buyers choose to wait to buy a vehicle manufactured in the new year. Add to it the effect of demonetisation, and despatches are likely to fall further during the last month of 2016.
SIAM maintained that it expected the fall to be temporary, and that volumes were expected to return to their past trajectory once the liquidity situation improved.