Demonetization and Auto Sector

Unless you have been living under a rock, you must be aware about the recent “bombs” thrown by our Prime Minister for curbing black money in our country. Because of these new policies,buying a car would probably be the last thing on anyone’s mind right now. Or maybe if you know of a car dealer who is accepting old currency 500-1000 notes and giving you a backdated bill for your vehicle.( P.S this is not an idea to use your old currency).The automotive industry would definitely take a hit from this but get a clearer picture, we need to wait and see what the future has in store for us.

Used Car Market

The used car market will take the biggest hit from this as the actual worth of a used car is not really similar in every situation and most of the transactions done are usually in cash. Also, their are certain restrictions on withdrawing a lot of money at least for the foreseeable future.The instant aftermath of demonetization was the drop in shares of major automotive companies and they closed with a loss of 2.5% on BSE Auto Index on the 9th of November.Even the two-wheeler market will take a considerable temporary hit as having a PAN account number has been made compulsory while buying a new two-wheeler.Apps like Paytm will play a major role and benefit a lot from this move as you can book your vehicles online through them.So it’s too early to comment on the actual effect of this on the automotive industry, however, for the time being, the sales have taken a hit and are expected to be slow until the entire scenario is clear.The aftermath after half a month is that demonetisation has seriously affected the sales of cars in our country. According to the head of sales for a leading car manufacturer in India, sales have dropped by almost 60 percent. Used car sellers are claiming that even the enquiries about buying cars have dropped down to zero as no one is thinking of buying a car at the moment and are hardly even willing to sell their old vehicles. The most affected segment is the high end used car market. Most of the transactions in this particular segment were highly cash driven and the authorities have their eyeballs glued at their bank accounts.

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