Demonetisation: The Automobile Industry is Feeling the Pinch

Mahindra & Mahindra Ltd saw a substantial fall in sales to 32,499 units in November from 41,590 units a year ago. (Photo: iStock)

The demonetisation of high-value currency notes and the ensuing cash crunch hit wholesale sales of automakers in November, with several players reporting a flat year-on-year performance or a dip in monthly sales.

To be sure, the sales numbers released by automakers for the last month may not be fully-indicative of the ground reality, as the time gap between a booking made at the dealership and the corresponding sales being booked by the automaker runs into almost a fortnight. Also, since November is a festive month, manufacturers typically push inventories to their respective dealer networks anticipating a rise in demand.

Market leader Maruti Suzuki India Ltd posted a 12.2 percent year-on-year rise in its total sales to 1,35,550 units. This was backed largely by sales of its recently-launched Vitara Brezza and Baleno. Sales of the company’s utility vehicles, which includes the Vitara Brezza, almost doubled to 17,215 units. Sales of its compact hatchbacks, including the Baleno, rose 10.8 percent to 49,431 units.

Tata Motors Ltd.’s total sales were flat year-on-year at 38,900 units, supported largely by the Tiago hatchback. The company had sold 38,918 units a year ago. Passenger vehicle sales rose 22 percent to 12,736 units, even as commercial vehicle sales fell 17 percent to 20,538 units. It’s the truck segment that took the maximum hit and the management cited demonetisation as a major reason for the decline.

The impact of demonetisation was felt across all (truck) segments.

Tata Motors’ statement on commercial vehicle sales in November

Mahindra & Mahindra Ltd saw a substantial fall in sales to 32,499 units in November from 41,590 units a year ago.

“While we expected an improved auto industry performance on the back of the festive season and other positive parameters such as rural demand and interest rates softening, the sudden announcement of demonetisation has brought in an immediate disruption and uncertainty,” a company release quoted President and Chief Executive (Automotive) Pravin Shah as saying.

Passenger vehicle sales for M&M fell to 13,217 units from 19,662 units a year ago.

Chennai-based commercial vehicle manufacturer Ashok Leyland witnessed a 7 percent rise in volumes at 9,574 units versus 8,971 units sold a year ago.

Two-Wheeler Segment

The two-wheeler category saw TVS Motor Company Ltd. post a decline in sales numbers to 2,24,971 units from 2,25,401 units a year ago.

Mid-range player Royal Enfield, a part of Eicher Motors Ltd, saw volumes rise yet again. Royal Enfield has seen meteoric sales growth over the last few quarters now, and commands a long waiting period. Royal Enfield saw a 40 percent rise in volumes at 57,313 units, even as its exports more than trebled at 1,470 units.

While sales numbers of the remaining two-wheeler manufacturers were not shared at the time of filing this story, BloombergQuint had recently spoken to dealers of the manufacturers about the condition in the retail network, each of whom said sales had fallen on account of a paucity of cash.

(Read the full story on BloombergQuint)