The industry was expecting to sell 3 million passenger vehicles for the first time in 2016-17, but now it seems a moot possibility.
Companies and dealers pushing year-end car sales in December with attractive discounts will have to make more effort because of demonetisation.
“December is even better than festive months in some years. But the sentiment now is really weak and we do not expect things will look up before the next calendar year,” said the chief executive of a Delhi-based dealer of Maruti Suzuki cars.
The major fallout is likely to be stock pile-ups at dealerships. “This is our biggest worry. If we are unable to liquidate most of the stocks by December, we will have to offer discounts to sell cars made 2016 in January,” said another car dealer.
An impact is also expected on dispatches by manufacturers. The industry was expecting to sell 3 million passenger vehicles for the first time in 2016-17, clocking double-digit growth after a five-year gap.
Earlier this month, the government withdrew currency notes of Rs 500 and 1,000 from circulation. Curbs have been imposed since on withdrawing and depositing money in bank accounts.
Cold December for car sellers
December is usually a month of high sales for cars but it might different this year
Other years
As sellers focus on liquidating stocks before the next year, cars are driven out of showroom at a faster pace
This year
- Pressure on sales because of cash crunch in the economy, caused by demonetisation
- Inventory levels might rise; wholesale volumes might slow down
- Companies offering 100 per cent financing
Sector target*
3 million
*For FY17
Some dealers said they had not received money from banks for cars they had delivered. Loan processing, too, has taken a back seat at banks as most employees are busy with cash transactions.
“There will be a big effect on car buying. We have seen bookings come down by 38 per cent on an average,” said Jnaneswar Sen, senior vice-president, sales and marketing, Honda Cars India.
“Cash circulation will normalise by the end of March and sales will remain challenged till then,” equity research firm Jefferies said in a note on Monday as it lowered sales estimates for cars, two-wheelers and tractors by 2-5 per cent in 2016-17 and 2017-18.
Image: A model poses with 'Kizashi' car in New Delhi. Photographs: B Mathur/Reuters.
