Mechanics talk at a vehicle maintenance workshop near the Delhi city boundary in Faridabad, Haryana, India (Photographer: Prashanth Vishwanathan/Bloomberg)

Demonetisation Forces Automakers Into The Slow Lane In December

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  • Automakers bore the brunt of the demonetisation in December, with passenger cars sales slumping 8.1 percent to 1,58,617 vehicles – the worst decline in the last 16 years.

    Total vehicle sales fell 18.7 percent in the last month of 2016.

    Two-wheeler sales, a sizeable portion of which comes from the rural belt, plummeted 22 percent year-on-year to 9,10,235 units, according to data released by the Society of Indian Automobile Manufacturers (SIAM). December was the first full month after the government’s surprise move to demonetise old Rs 500 and Rs 1,000 currency notes and reflects the true picture as far as wholesale demand is concerned.

    Motorcycle sales during the month fell 22.5 percent to 5,61,690 units, while scooter sales plunged 26.4 percent to 2,84,384 units.

    Commercial vehicles too were not spared, with sales in the category falling 5.1 percent to 53,966 units. Sales of medium and heavy commercial vehicles declined 12.4 percent, while those of light commercial vehicles just managed to stay in the green with a 1.1 percent rise.

    Exports too fell in December, down 3.1 percent to 3,01,295 units.

    SIAM expects sales to recover in 2-3 months. But Vishnu Mathur, director general of the lobby cautioned that the industry could miss the earlier sales forecast if the impact of the cash ban proved to be more long-lasting. The industry body had projected passenger vehicle sales to grow 10-12 percent year-on-year during the current fiscal (April-March).

    Domestic passenger vehicle sales in the ongoing financial year have thus far grown 8.6 percent year-on-year to 22.43 lakh units.

    Total passenger vehicle sales in 2016 grew by a mere 1.4 percent, despite a relatively low base in 2015. The growth in the financial year, thus far, has also remained rather muted at 2.5 percent. It’s the utility vehicle segment which has seen the highest spike, growing by 33 percent, year-on-year.

    The rural market has witnessed a magnified effect of the slowdown, SIAM said, emphasising the sharp fall in two-wheeler despatches.

    Mathur hoped for some positive announcements which would incentivise potential vehicle buyers in the upcoming Union Budget. The automobile industry has been asking for sops from the government in the form of a reduction in duties levied on vehicles, and other subsidies for electric and hybrid vehicles. The government is scheduled to detail its Budget for financial year 2017-18 on February 1.

    BloombergQuint