Millennium Post

Cash ban: Auto, tractor makers suffer Rs 8,000-cr revenue loss

The Indian automobile and tractor sectors suffered a revenue loss of Rs 8,000 crore in November and December due to demonetisation, according to Mahindra & Mahindra Managing Director Pawan Goenka.

Sales momentum in the automobile industry, which was on a high after a good festive season in September and October last year, came to a halt when the ban on Rs 500 and Rs 1,000 notes was announced in early November, according to Goenka. "We have worked out by using some kind of formula that tractor and auto industry lost Rs 8,000 crore revenue in November and December," Goenka said in an interaction.

He explained that the way calculation was done was "what would have happened versus what has happened" based on growth rate up to October and "if that growth rate had continued in November and December".

"That's a fairly straight forward calculation. It's Rs 8,000 crore for the industry and it's about 10 per cent loss of revenue," Goenka said. In November, vehicle sales across categories registered a decline of 5.48 per cent at 15,63,665 units, from 16,54,407 in November 2015. It was the steepest decline in 43 months when total sales had declined by 7.75 per cent in March 2013.

In December, monthly automobile sales growth in India had slipped to a 16-year-low in December, with total vehicle sales declining by 18.66 per cent at 12,21,929 units compared to 15,02,314 in December 2015. According to SIAM, most of the major segments, including scooters, motorcycles and cars, witnessed record decline December sales due to cash crunch following demonetisation.

Stating that the auto and tractor sectors were "in very high momentum" in September and October, Goenka said: "The kind of sales we had in October, I have not seen in a long time." In September 2016, total sales of vehicles across categories grew by 20.16 per cent to 22,60,992 units as against 18,81,643 units in the year-ago month. There was a growth of 8.14 per cent to 22,01,571 units in October 2016 from 20,35,905 units in October 2015.

Goenka further said: "It just stopped the momentum and then it takes time to build up because there is no rational reason why people do not buy now." He said at present there are "too many uncertainties" such as the upcoming GST and that "probably is having bigger psychological impact" on consumers.

While the overall impact on demonetisation "was very deep in November and December", he said it has started improving in January and "I think by now we are almost done and I believe that by end of March we will be through".
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