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First Anniversary Of 2016 Indian Banknote Demonetisation: How Auto Sales Changed In One Year

Its been one year of 2016 Indian banknote demonetisation, and today we are presenting how the automobile industry responded to the biggest announcement made by Narendra Modi

Photo Credit : Reuters


One of the biggest announcement - the 2016 Indian banknote demonetisation came as a blow to the entire economy when, on 8 November, Prime Minister Narendra Modi banned the Rs 500 and Rs 1000 notes of the Mahatma Gandhi series.

The move that was meant to curb flow of Indian black money is celebrating its first anniversary today. 

The 2016 Indian banknote demonetisation impacted almost every other sector. Even the automobile sector was not able to shrug off the impact of 2016 Indian banknote demonetisation; its sales and volumes were the worst hit by the announcement.

Today, on first anniversary of demonetisation, we will present you, how in this one year, sales of automobile industry behaved and changed in a period of 11 months.

In the first month of demonetisation, after posting healthy growth during festive season, the auto industry’s sales skidded with commercial vehicle segment being the worst hit. The segment witnessed 11.58 per cent year-on-year de-growth.

The major blow was during the month of December 2016 when sales slumped to 16 year low, with total vehicle sales declining by 18.66 per cent as demonetisation hit the industry hard.

This was the highest decline across all categories since December 2000, when there was a drop of 21.81 per cent in sales.

Passenger vehicle sales declined 1.36 per cent; the previous biggest decline in sales witnessed by the segment was in October 2014 with a drop of 7.52 per cent.

Total two-wheeler sales in December also witnessed the steepest decline since SIAM (Society of Indian Automobile Manufacturers) started recording data in 1997. It tanked 22.04 per cent.

At the beginning of calendar year 2017, while passenger vehicles sales were able to revive, commercial vehicles and two-wheelers continued to struggle with the repercussions of demonetisation.

Demand for commercial vehicles and two-wheelers mainly comes from the rural economy, and the worst impacted from 2016 Indian banknote demonetisation was this market. Moreover, out of all the automobile segments, hard cash is used the most when buying two-wheelers.

So, it is quite evident that these two categories bear the maximum brunt of centre’s note ban move.

By February 2017, the industry was somehow able to revive from the move which was aimed at curbing the flow of black money in the Indian economy. It recorded stable growth and steady recovery.

What further came as a good news for commercial vehicles is the Supreme Court ban on BS-III. As a result of which, CV makers offered heavy discounts on BS-III vehicles, leading to high sales in March 2017.

New launches and pent-up demand helped passenger vehicles and two-wheelers register good year-on-year growth.

Indian government’s announcement of GST (Goods and Services Tax), applicable from 1 August, also came as a boon to the sector with sales across categories posting healthy growth.

Overall, today on demonetisation completing one year, it can be said that the initial two months were really tough for the Indian automobile sector. However, post that, the industry continued on its growth path.

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