On Novemeber 8 2016, Prime minister of India Mr. Narender Modi took everyone by surprise when he announced demonetisation of 500 & 1000 rs currency .Since then, most Indians have been struggling to maintain a decent amount of liquid cash.
This shortage of currency has resulted in a decline in sales of cars and bikes across the country, adversely affecting the auto industry. According to some stats new car sales for November 2016 may have dropped by up to 30 per cent whereas used car sales could’ve taken a 60 per cent hit but auto Industry experts are hoping that this is just a temporary slump and sale of two wheeler & four wheeler will be boosted again. Although we can be sure only when result arrives in upcoming months. Meanwhile let’s take a closer look at demonetisation effect on auto industry .
There will be a temporary disruption in the auto industry in the near term due to the ban on currency notes. But a larger impact will be in the rural markets as the number of cash transactions is high. Motorcycle sales in the rural areas could also slow down since a majority of two-wheelers here are bought with cash. With only a limited amount of cash withdrawals happening via banks and ATMs, most customers have opted to postpone or even drop their purchase plans.This move has also affected the production of two-wheelers. one of the leading two wheeler manufacturer in India- Honda Motorcycle and Scooter India Pvt. Ltd. has taken steps to rationalise its production since the sales have witnessed a dip. The manufacturer is planning to take steps like no-production days to reduce inventory pressure on dealerships and to let them clear out the existing stock.
The used car industry has also taken a huge blow post demonetisation because most of the payments in this sectors are made via cash. Dealers in the NCR , have reported that the purchase of used cars has come to a virtual halt, The delay in buying decisions too, will result in a lot of unsold cars being carried forward to next year which will make them cheaper,” a used car dealer said.
The automotive service & repair industry has also suffered post demonetisation. Workshops has seen a significant decline in footfall. People are delaying or postponing their vehicle service & repair because of cash crunch .
In a nutshell, although the industry has suffered a setback, it seems to be a short-term hardship and the automobile industry will revive itself soon .