Two-Wheeler Sales Skid After Government’s Currency Purge
At a time when one has to stand in queue for hours to withdraw cash from ATMs or a bank branch, and yet walk out with a maximum of Rs 2,000, purchasing a two-wheeler is likely to be low on the priority list.
Retail sales trends at two-wheeler dealerships across the National Capital Region (NCR) have shown a sharp decline since the demonetisation of Rs 500 and Rs 1,000 currency notes came into effect on the midnight of November 9. Authorised dealers of some of the biggest two-wheeler manufacturers such as Hero MotoCorp Ltd., Honda Motorcycle and Scooter India Pvt. Ltd., TVS Motor Company Ltd., Bajaj Auto Ltd., Eicher Motors Ltd.’s Royal Enfield, and the premium player, Harley-Davidson India had a similar story to tell.
We used to sell 20 vehicles per day earlier, and since the demonetisation move, sales have fallen to 2-3 units per day. The footfalls for enquiry have also drastically dropped.Rohit Gaur, General Manager, Jasodha Auto (an authorised dealership of Hero MotoCorp)
Typically, two-wheelers purchases, particularly in the commuter segment, are carried out through cash, and the temporary cash liquidity crunch seems to have had a drastic impact on the fortunes of dealers.
“It may be a good move in the long term, but for now sales have stopped. Close to 95 percent of our customers pay by cash, and only a handful use other means such as credit cards. With only Rs 2,400 in their hand, it is not surprising that they aren’t buying two-wheelers,” said a representative of a Honda Motorcycle dealership, who did not wish to be quoted.
Hero MotoCorp and Honda Motorcycle are the two largest two-wheeler manufacturers in India, and dealers of both companies said sales were down to one-fifth of what they were before November 8.
A TVS Motor dealer said he managed to sell only one vehicle in the first two days after demonetisation came into effect. His average daily volume was around 8-10 units per day before the government’s latest move to fight black money.
Segments above the commuter category fared only a little bit better.
We have seen a drop in sales volumes, yes, but the number hasn’t been drastic. Against daily sales of around 3-4 units, the number has fallen to roughly 2-3 units a day.Tapan Sharma, Dealer Principal, Aman Automobiles (an authorised dealership of Royal Enfield
He added though that the situation was much worse for after sales works such as repairs and servicing, and said the decline in that space was nearly 60 percent.
Things worsened again at the top of the pyramid. Harley-Davidson, a premium motorcycle manufacturer, has seen sales drop to almost zilch. “Sales have fallen to almost nothing over the past week. This month has been the worst in the year so far. The few customers that did turn up, brought with them bundles of notes of Rs 500 and Rs 1,000 denomination which we could not accept. The very few sales that we did manage to make were all via alternate sources of payment such as debit cards,” said a representative of a Harley-Davidson dealership in south Delhi.
This sort of a fall was expected. With limited cash in the market, people’s priorities have changed…it is more about running the house now. This is expected to last for at least a quarter. November is expected to be weak in terms of sales, as also December.Abduj Majeed, Partner-Assurance, PricewaterhouseCoopers India
Typically, December is a slow month in terms of vehicle sales as buyers choose to wait for a month to get a vehicle which is manufactured in the new year. November, which is a festive month and usually sees high sales, has been hit this time around.
“It is likely that manufacturers would cut production. It is unlikely that they will pile up inventory with this being the end of the year. The situation is expected to improve only by February-March,” Majeed added.
The industry lobby group, Society of Indian Automobile Manufacturers (SIAM), also said it had expected a temporary fall in numbers. “We had expected this temporary fall, but things will improve soon,” said Sugato Sen, Deputy Director General, SIAM. Sen added that a downward revision in the sales forecast for the financial year has not been made yet.
Given the prevailing sentiment in the market, with the common man scrambling to arrange for funds for essential commodities, a substantial fall in November two-wheelers sales figure is almost a certainty.