Demonetization: Boon or Bane for Auto India?

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Apparently, demonetization deem to be an encumbrance for the public, despite the fact that it’s just a firefly effect. The act might seem to jolt the economy, but it’s just a matter of time, turning everything upside down when the light starts to gleam. The so-called ‘reluctance’ or ‘resistance for a change’ might be the agony you are experiencing, but no pain is eternal in fact the ‘bitter berry taste better, later’. Automobile industry happened to be plotted under a great downfall, but did we fail to perceive the under math? Numbers never lie, all figures speak ‘in favor’ of automobile industry so far contradictory to what one would have expected in the backwash of a nationwide war against black money.

Some figures for a warm up

India’s automobile mobile industry is one among major benefactors to GDP. According to latest statistics, they hold a 7.1% contributional share towards GDP. Number of wheels are inversely proportional to automobile market leaders, meaning two wheelers are major market leaders compared to cars and trucks. The two-wheel sector has around 80% market share in theIndian economy, riding along with the middleclass and youth. While urbanization is marked by increases number of wheels in cities, the development is reflected in rural regions by introducing motor engine. The passenger vehicles (PV) holds a 13% market shares which are expected to grow exponentially in the next 5 years.  Foreign investment in Indian automobile industry has skyrocketed in the past 16 years, shooting a 16 billion dollar into the Indian market. Now you might light the bulb, why you often see BMW’s, Ferraris, Audi’s etc. on Indian roads.

The effect of demonetization

An eventful November indeed did panic the automobile manufacturers, especially the night of November 8th. The confusion borne in the economy took a little while to settle, and as you would expect there was a steady drop in sales all across the country. Unfortunately, the restrictions in carrying physical cash badly affected the two-wheeler sector, however, the four wheeler market took a much lesser hit provided the fact that majority of them get on theroad on finance. Deliveries happened after 8th, but their financial settlements were made before November 8th. Banks halted their car loans and two wheeler loans for a while until the storm concludes.

But here are some reports from the automobile industry that would patently blow your mind. Despite the cash scarcity, Maruti-Suzuki had an overall growth of 14.2% in domestic sales with a disposal of around 1.26 lakh units of four wheelers compared to 1.10 lakh same month last year, that too in the Diwali season. The hatchback segmentsfavorite Alto, Wagon & Swift minded steady growth, whereas, their new releases like Vitara Brezza& Baleno received a positive response regardless the note ban.

Story with others

We all know how expanded Maruti-Suzuki is, but the sudden hike in growth ain’t the story of M-S alone, Toyota, Volkswagen, & Renault are others who share similar figures during this financial renovation. While Toyota India marks a 10% growth compared to last year, Volkswagen sold 3000 units additional compared to 2015 November. Demonetization seems to have least to no effect on Renault, however. They had a great year bagging a whopping 178 percent growth in the 2015-16 with a 23 % sales growth in November alone. But the story was a little sob for Mahindra & Mahindra, they had a drop of 20 % in both commercial as well as passenger segment.

The underlying need a scrutiny, but vehicle dealers and banks came up with new strategies to tackle this situation. Many automobile dealers started e-payment services tied with e-wallets like Paytm and banks offer 100% finance, cashless schemes etc. to bag customers. This might be the story with ethical businesses as most of these sectors work in close relations with banks and other financial institutions. Moreover, the payments are often channeled via banks, credit cards, financiers etc. such that the cashless white money flow in not at all interrupted. So the is a hidden message from automobile industry might be ‘Being legit always survive in opulence!

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