Forbes India 15th Anniversary Special

Auto sales hit a rough patch

While two-wheeler sales were down in November it is still to early to assess the final impact of demonetization on the auto sector

Samar Srivastava
Published: Dec 2, 2016 05:11:36 PM IST
Updated: Dec 6, 2016 03:10:10 PM IST

Auto sales hit a rough patch
Image: Shutterstock

Sales of cars and two-wheelers slowed down in November as customers grappled with lower cash availability in the aftermath of the governments move to demonetize higher value currency notes.

While roughly half of the carmakers reported lower dispatches to dealers they also took pains to point out that the initial slowdown in sales had reversed towards the month end.  Two-wheeler sales were far more badly affected. When compared to cars a smaller percentage of two-wheelers are financed through loans. As cash dried up, sales fell.

The country’s largest two-wheeler maker Hero Moto Corp registered a 12.3 percent drop to 479,856 units in November when compared to the same period last year. The company in a press release said it expects the situation to improve without specifying a time frame. Smaller rival Bajaj Auto registered a 12.8 percent fall to 269948 units.

Auto sales hit a rough patch

The slowing sales which came after the festive month of October meant that it is difficult to account precisely how much of the slowdown was due to demonetization and how much due to other factors. In October manufacturers had stocked dealers with higher inventory in anticipation of higher sales. This festive season was particularly good as government employees received a portion of their higher wages as arrears due to the implementation of the Seventh Pay Commission salary hikes.

As a result the November auto numbers reported were equally a result of re-stocking inventory at dealers. A clearer picture on the impact of demonetization of high value notes should be known once the December numbers are out. Among large carmakers Maruti’s numbers stood out as the company registered a 14 percent rise in sales to 126,220 units.