Demonetisation effect: Automobile sales growth rate drops at 16-year low

What would be the long-term effect of demonetisation is debatable. It seems, however, that demonetisation has affected the automobile industry very hard. According to latest data by the Society of Indian Automobile Manufactures (SIAM), monthly automobile sales growth rate in India slipped to a 16-year low in December 2016 - the total sales declined by 18.66 per cent.

The data reveals that vehicles across categories sold 12,21,929 units last month, slipped from 15,02,314 units in December 2015. Only the light commercial vehicles segment saw growth - 1.15 per cent at 31,178 units.

Vishnu Mathur, director general, SIAM, told reporters, "This is the highest decline across all categories since December 2000 when there was a drop of 21.81 percent in sales. The reason is largely due to the negative consumer sentiment in the market due to demonetisation."

Domestic car sales declined 8.14 per cent to 1,58,617 units in December 2016 from 1,72,671 units in year-ago month. The decline is the lowest since April 2014 when sales slipped by 10.15 per cent.

Passenger vehicle sales were at 2,27,824 units last month as against 2,30,959 units in December 2015, down only 1.36 per cent. The segment witnessed the biggest decline in sales in October 2014 with a drop of 7.52 per cent.

Likewise, two-wheeler sales saw the biggest decline since SIAM started collecting data in 1997. The segment tanked 22.04 per cent to 9,10,235 units compared with 11,67,621 units in December 2015.

However, the most affected is the scooters segment which saw the biggest decline in over 15 years. Its sales fell by 26.38 per cent at 2,84,384 units in December 2016 as against 3,86,305 units in the year-ago month. The segment witnessed the biggest drop of 27.05 per cent in March 2001.

Motorcycle sales were at 5,61,690 units last month from 7,24,795 units a year earlier, down 22.5 per cent. The previous biggest decline of 23.07 per cent was recorded in December 2008.

Even the commercial vehicles segment was hit badly. Its sales were at 53,966 units last month as against 56,840 units in December 2015, down 5.06 percent.

Mathur, however, concluded by saying that the decline is temporary and if the upcoming budget boosts consumer sentiments as well as improves the overall economy, the sales may pick up.