A customer sits next to a Tata Motors Ltd. Nano automobile at a dealership in New Delhi (Photographer: Sanjit Das/Bloomberg)

Demonetisation Aftermath: Worst Yet To Come For Automakers, Say Brokerages

India’s biggest automakers reported sharp decline or at best flat sales growth in November as the government’s demonetisation drive gave buyers cold feet and put the brakes on the dream run in auto stocks.

Last month’s numbers though may not be fully reflective of the ground reality as auto manufacturers in India report despatches to dealers and not end users. Broking firms say there may be more pain in the coming months.

Dealers had confirmed sharp drop in despatches on account of the cash crunch in the week immediately following the government’s withdrawal of old Rs 500 and Rs 1,000 currency notes from circulation. While car sales held up, sales of tractors and commercial vehicles bore the brunt of the slowdown.

Deutsche Bank

  • November passenger vehicle (PV) volumes grew at an estimated 5 percent YoY mainly due to 14 percent YoY growth in Maruti.
  • Demonetisation will impact passenger vehicle sales over the next three to six months.
  • Impact should reflect in the wholesale sales for December and in the fourth quarter of financial year 2016-17
  • Do not expect November wholesales to be impacted materially as original equipment manufacturers have not altered their production schedules.
  • Building in a significant deceleration over the next four months.

Credit Suisse

  • As anticipated, companies with waiting period or low inventory witnessed the smallest impact of demonetisation.
  • Two-wheeler sales volumes fell 5 percent year-on-year; for commercial vehicles and tractor segments witnessed double-digit decline in sales.
  • Sharp decline seen in two-wheeler retail given high cash usage; wholesales declined only 5 percent year-on-year. Unless volumes pick up sharply, December should witness a steeper cut.
  • Rural cash crunch reverses tractor growth trend seen in the current financial year till October.


  • The retail trend needs to be monitored.
  • Possibility of a lagged impact in December wholesale.