Demonetisation: November retail sales in automobile sector feared to go down by 30%

Post demonetisation, automobile sector has seen a steep decline in sales. The number of people visiting the dealership has gone down significantly low.

With small business and trading communities are holding themselves from purchasing decisions because of cash crunch, retail sales are expected to go down by 30%.

The situation is worse in the used car market and service stations as these mostly have transactions that are done in cash.

In markets such as Gujarat, Delhi and Punjab where the number of people that pay in cash is higher, sales may have dropped as much as 50% after the demonetisation was announced on November 8, bankers and dealers said.But all of that may not be lost sales.

"In Gujarat, where a lot of car purchases used to be in cash, actual car sales are nearly 50% down. But, some of this looks like short-term implication; the long-term demand is intact. This only looks like postponement of purchases,” Dipak Gupta, joint managing director at Kotak Mahindra Bank told ET.

The rural part of the nation also has seen a very tremendous decline in demands as people there aren’t comfortable with banking systems.

"Rural people are not so comfortable with the banking system and they believe in keeping cash at home,” a top executive at another auto firm, who didn't want to be named, told ET.

Many prospective customers are preoccupied in managing the cash crunch, and probably have little time to think about things that aren't urgent, like buying of a car or a bike.

"Even where loans have been sanctioned people don't want to draw money right now,” Rajiv Anand, executive director for retail banking at Axis Bank, told ET.

Auto dealers said they were writing to manufacturers to reduce dispatches looking at the demand situation.

However, according to experts, there is demand, but buying has been delayed due to lack of funds.
(image: indiatimes)