Cash crunch hits November auto sales

Just as automakers in India had feared, the government’s demonetisation strategy, implemented from November 8, 2016, has had its impact on vehicle sales, which indicate a slowdown across segments. 

The move to demonetise Rs 500 and Rs 1,000 currency notes exactly a month ago has seen strapped-for-cash customers, particularly in rural India, and buyers in urban India delay purchase decisions including those for new vehicles.

As per the November 2016 sales numbers released by industry body Society of Indian Automobile Manufacturers (SIAM), overall vehicle sales have slipped into negative territory after 15 months of continuous growth. Also, considering these are wholesale numbers of vehicles supplied by automakers to their dealers across the country, the real-world retail story could show even poorer sales.

It was in August 2015 that the Indian auto industry had last seen a year-on-year growth decline (-2.07 percent). Overall November 2016 sales numbers at 1,563,665 units are down 5.48 percent year-on-year. The slowdown in sales is being felt across all the vehicle segments.

However, industry body SIAM says November sales have been “temporarily disrupted due to demonetisation,” which indicates that it is hopeful consumers will begin the buying habit sooner rather than later. 

The passenger vehicle (PV) segment is the only one which has kept its head above water. At 2,40,979 units sold in November 2016, the segment posted marginal year-on-year growth of 1.82 percent. While passenger car sales were flat at 0.29 percent, UVs saved the day with sales of 53,800 units (+10.07 percent), while van sales were down to 13,573 units (-7.50 percent).

The overall good performance of the industry in the first seven months of FY2017 has helped stave off the poor November numbers. Nevertheless, industry pundits are of the opinion that it will take a quarter or two more for the country to weather the full impact of the demonetisation strategy.

Till then, vehicle manufacturers will be keeping their fingers firmly crossed, hoping that customer footfalls increase and more customer enquiries turn into sales. In the eight-month April–November 2016 period, passenger vehicle sales rose 9.84 percent, with passenger cars, utility vehicles and vans growing by 3.82 percent, 33.35 percent and 3.99 percent respectively year-on-year.

Meanwhile, automakers, who will suspend production for a few days to carry out routine factory maintenance, are likely to extend the same due to slowing growth on account of demonetisation, according to a report by the Economic Times. However, carmakers such as Maruti and Hyundai maintained that the same was as per previous plans and not due to the cash crunch, the report added. 

Homegrown carmaker Mahindra announced it is going to undertake scheduled maintenance shutdown at some of its automotive and tractor plants in December 2016. It will also observe a few days as 'No Production Days' on a need basis at some of its automotive and/or tractor plants including the Chakan plant as part of its efforts to optimise inventories during year-end.

Renault-Nissan, which has a facility in Tamil Nadu, said it will bring down the number of shifts at the plant from three to two in the second week of December. But the carmaker said that the third shift was introduced to cater to the demand for the Renault Kwid and the Datsun redi-GO. "Demand for the cars remains strong but waiting times have been successfully brought down. In addition, plant operations have been optimised to maximise production in two shifts," the report quoted the carmaker’s statement.