Six months after demonetisation, auto sales back to normal but BS-III brakes growth | business-news | Hindustan Times
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Six months after demonetisation, auto sales back to normal but BS-III brakes growth

Though the auto sales have returned to normalcy, the Supreme Court order banning the sale of Bharat Stage III vehicles from April 1 slowed the growth the market had achieved, six months after demonetisation.

black money crackdown Updated: May 09, 2017 11:43 IST
Gulshankumar Wankar
Though the auto sales have returned to normalcy, the Supreme Court order banning the sale of Bharat Stage III vehicles from April 1 slowed the growth the market had achieved, six months after demonetisation.
Though the auto sales have returned to normalcy, the Supreme Court order banning the sale of Bharat Stage III vehicles from April 1 slowed the growth the market had achieved, six months after demonetisation.(Reuters file photo)

Six months after Prime Minister Narendra Modi demonetised Rs 500 and Rs 1000 bank notes which drained out over Rs 15 lakh crore from circulation, the automotive sector is back to normal, trends and analyses show.

In the cash crunch that followed the November 8 announcement banning high denomination notes, sales of two-wheelers, mass-market budget passenger vehicles (PVs) and those in rural markets were worst hit, since they are largely cash-dependent.

Sales nosedived in the third quarter (Oct-Dec) of FY 2016-17, but automakers hoped “most buyers were only delaying, not cancelling” their plans of buying a vehicle. Sales of commercial vehicles, however, remained marginally affected.

In December, the industry reached a 16-year low, according to the Society of Indian Automobile Manufacturers (Siam), with monthly domestic sales of cars, bikes and commercial vehicles dropping by 18.66%.

A Kotak Institutional Equities Research report based on Siam numbers said the impact of demonetisation was lesser in south Indian states than in north and west India. Sales of passenger vehicles in the five southern states combined – Karnataka, Andhra Pradesh, Telangana, Tamil Nadu and Kerala – grew 16.9% in December 2016, while the growth was by 0.3% in north India, 8.3% in eastern and 8.5% in western states.

By March, vehicle sales were accelerating for most companies. However, some automakers hit a speed-breaker by month-end when the Supreme Court banned the sales of Bharat Stage-III vehicles from April 1, when new emission norms came into force across the country.

Sitting on huge stocks of the disallowed BS-III vehicles, truck and bus-makers Tata Motors and Ashok Leyland, and bike-makers Hero MotoCorp, Bajaj Auto, etc, were among the worst affected by the SC order. But how much demonetisation was to blame for this cascading effect remains a mystery.

Demonetisation blues had faded by April, when all two-wheeler makers, except Hero MotoCorp and Bajaj Auto, reported year-on-year monthly growth in sales. Again, the impact of demonetisation on the two-wheelers market was not clear amid losses suffered due to unsold BS-III stocks. Bajaj Auto posted -0.1% growth in domestic sales while Hero domestic sales dropped 3.5%, also owing to owing to pre-buying of BS-III vehicles in March.

In the four-wheeler segment, the overall domestic PV sales were up 17.4% in April, with Maruti Suzuki, Honda Cars, Hyundai, Tata Motors and Toyota Kirloskar posting positive sales, mainly driven by new product launches and consistent demand of popular markets.

Only Mahindra & Mahindra was seen in red in the post-demonetisation sales race, with its PV sales declining at 14.7% in April year-on-year “owing to stiff competition”, an HDFC Securities report said.