The Indian automobile industry accounts for 7.1 per cent of GDP owing to robust two wheeler sales, stable commercial vehicle sales, and growing car sales. In recent years, car exports too have increased.
There’s no doubt that demonetisation curbs purchasing power of a significant many in what has traditionally been a cash transaction market. While the impact may not show up rightaway only because bookings at dealerships aren’t dispatched immediately but controlled to pace demand and supply. As such, a lot of bookings that were paid for last month or earlier would have reached customers this month, and this pattern may hold true even next month. While EMIs are a banking affair, down payments are what families save for in cash, or pay for in cash. The Yahoo India Year in Review 2016 lists demonetisation as a major financial event that shook India this year.
Well, all that looked so economically strong, doesn’t anymore. Thank you, demonetisation. With high value notes ostracised, Calcutta reports no new luxury car booking since the announcement. That is a Rs 60-70 crore loss in revenue compared to November 2015, and about 200 cars sitting pretty at stocking yards. Worse still, bookings made before demonetisation came into effect have been cancelled.
By contrast, dealers of Mercedes, Jaguar, Volvo, Audi, BMW, and Porsche had clocked sales of around 170-200 fancy wheels valued at over Rs 60-70 crore last November. The country is absorbed in how to conduct affairs what with daily spending capacity crunched. And it seems, Calcutta even more.
The luxury car market relies highly on financed car sales. Demonetisation in the long run will work to strengthen the pattern. It’ however the initial cash down payment on booking pattern that’s been disrupted for good.
Mass-market car manufacturers have resorted to varied methods to encourage bookings and sales. Volkswagen will let you book a car today and begin paying EMI in 2018. Mahindra is offering noticeable discount plans ranging from Rs 50,000 upto Rs 3 lakh per vehicle. Mahindra SUVs have quite a reputation in rural and semi urban areas owing to its robust built and roadworthy prowess even where no roads exist. It’s always been a nice big SUV to have when you have money gained from farming. However, now with demonetisation, these areas have been hard hit with people scrambling to banks day after day in trying to hold on to the value of their now illegal tender. Buying cars is no longer the decision that guides people. Mahindra sales has in fact dropped by a quarter in November 2016.
via Times of India