November 8, has now become the historic moment all over the world so far. The decision to immediately scrap Rs 500 and Rs 1000 currency notes that accounts for approximately 87% of the overall economy has affected a raft of sectors. The entire nation has turned frugal, causing a sharp drip in demand for goods and services. On the other hand, the farmers and small industries are bearing brunt. Sectors like transport and real estate got a hard hit and several other industrial sectors will have to scale back services or production.
POSITIVE IMPACT: Interest rate and tax cuts soon
NEGATIVE IMPACT: Fall in sales of two-wheelers, commercial vehicles and luxury cars
The sales in utility vehicles is expected to be down by 40-50%, commercial vehicle sales down by 50-60% and two wheelers by 20-40% in the month of November. However, the sales of commercial vehicles, two wheelers and luxury cars are the worst hit by the demonetisation drive. Moreover, carmakers are skimping on production to streamline inventory and reduce the wholesale targets up to 40%.
In addition to this, dealerships across the nation got a drip by 50-60% while, bookings are dropped by 50%. Gautam Modi, a Mumbai-based Audi dealer, told media that sales have fallen by more than 45% in November even the rural markets which have accounted nearly two-thirds of entry-level motorcycle sales in the country are facing serious disruption due to this move.
Now, to offset the impact, manufacturers have started offering lower interest rates and zero down payments through dealers and finance companies to push sales. RC Bhargava, chairman of Maruti Suzuki, the country’s largest car maker, however sees this as a blip. Moreover, the impact on small car sales might become minimal as most of the transactions occur through bank financing or loans. “We have advance bookings and the waiting period for several models which will help us tide through this phase.”