Demonetisation slows down auto industry, sales drop at 16-year low by 16.88% | autos | Hindustan Times
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Demonetisation slows down auto industry, sales drop at 16-year low by 16.88%

autos Updated: Jan 10, 2017 14:08 IST

A line of Mercedes sit on display at the 2017 North American International Auto Show in Detroit, Michigan. (AFP file photo)

Demonetisation slowed the pace of the auto industry in December with monthly sales in India declining by 18.66%, a 16-year-low.

According to latest data released by Society of Indian Automobile Manufacturers (SIAM), major segments, including scooters, motorcycles and passenger cars, witnessed record decline in December sales, owing to negative consumer sentiments after Rs 500 and Rs 1,000 banknotes were scrapped by the Narendra Modi government on November 8.

Vehicle sales across categories slumped by 18.66% from 15,02,314 units in December 2015 to 12,21,929 units in December 2016, as per the SIAM data.

“This is the highest decline across all categories since December 2000, when there was a drop of 21.81% in sales. The reason is largely due to the negative consumer sentiment in the market due to demonetisation,” Vishnu Mathur, director general of SIAM, said.

Only light commercial vehicles segment grew at 1.15% with 31,178 units sold last month, he added.

Mathur, however, said the drop in sales is temporary but how sales pick up would depend a lot on “how the budget comes up with steps that will boost consumer sentiments and increase disposable income besides improving the overall economy”.

Domestic car sales were at 1,58,617 units last month as against 1,72,671 units in December 2015, down 8.14%. It was the lowest rate since April 2014 when sales declined by 10.15%.

Passenger vehicle sales declined 1.36% to 2,27,824 units in December 2016 from 2,30,959 units in the year-ago month. The previous biggest decline in sales witnessed by the segment was in October 2014 with a drop of 7.52%.

Similarly, total two-wheeler sales in December also slumped by 22.04% to 9,10,235 units as against 11,67,621 units in December 2015, which is the steepest decline since SIAM started recording data in 1997.

Likewise, scooter sales, which is mostly urban-centric, also saw the biggest decline in over 15 years, falling 26.38% at 2,84,384 units in December 2016 as against 3,86,305 units in the year-ago month. The previous biggest decline of 27.05% was recorded in March 2001.

Motorcycle sales also saw the biggest decline in eight years last month at 5,61,690 units from 7,24,795 units a year earlier, down 22.5%, SIAM said. The segment witnessed biggest drop of 23.07% in December 2008.

“Almost half of two-wheelers sales comes from rural markets, which have been hit hard by demonetisation,” Mathur said while explaining why the segment has suffered a big blow in December.

Sales of commercial vehicles were down 5.06% at 53,966 units in December 2016 as against 56,840 units in the same month in 2015, SIAM said.

Mathur said whatever sales December witnessed were “driven by the largest discounts ever that the industry has seen”.

He further said that moderation in sales in the auto industry is expected to continue this month as well as consumers defer purchases on Budget expectations.

“At present, there is stock inventory of almost one month in the auto industry, which will have to be cleared,” he added.

When asked if SIAM would revise its growth forecast for the ongoing fiscal for passenger vehicles, considering the drop in sales in November and December, he said the industry body hasn’t looked at the matter yet.

“However, with the way things are going and if the Budget doesn’t bring big steps to boost consumer sentiments, we may miss our forecast,” Mathur said.

Last September, SIAM had revised upward its growth estimate for passenger vehicles for the ongoing fiscal to 10-12%. The segment was originally pegged to grow at 11-13% but was later revised downward to 6-8%.

Mathur said that the auto industry hasn’t yet benefited from a good monsoon and 7th Pay Commission payouts and a lot would depend on the Budget going forward.

According to SIAM data, in the cars segment, market leader Maruti Suzuki India saw its domestic sales decline by 10.93% in December at 81,092 units as against 91,043 units in the same month a year ago.

Similarly, rival Hyundai Motor India also witnessed a decline of 10.95% at 33,037 units last month as against 37,101 units in December 2015.

Tata Motors, however, posted a jump of 39.59% at 9,632 units as compared with 6,900 units in December 2015.

In the motorcycles segment, market leader Hero MotoCorp saw its sales dip by 28.98% to 2,79,448 units last month as against 3,93,495 units in December 2015.

Homegrown rival Bajaj Auto also saw a decline of 11.35% at 1,06,665 units as against 1,20,322 in the year-ago month.

However, Royal Enfield posted a growth of 40.65% at 56,316 units last month as compared with 40,037 units in December 2015, thus becoming the third biggest motorcycle seller in the month overtaking Honda Motorcycle and Scooter India (HMSI) which posted sales of 53,400 units as against 92,280 in the same month in 2015, down 42.13%.

In the scooters segment, market leader HMSI posted sales of 1,51,758 units last month as against 1,98,260 units in December 2015, down 23.45%.

Chennai-based TVS Motor Co saw its scooter sales dip by 16.17% at 52,116 units as against 62,173 units in December 2015.

Hero MotoCorp also saw its scooter sales dip by 60.27% at 32,785 units as against 82,517 units in the same month a year ago.