December auto sales likely to be muted on note ban

By: | Published: December 31, 2016 6:45 AM

Vehicle manufactures may not have pushed too many vehicles to their respective dealers in December because of the already existing inventory from November.

Vehicle manufactures, demonetisation, Maruti Suzuki, dealer stocks, HyundaiVehicle manufactures may not have pushed too many vehicles to their respective dealers in December because of the already existing inventory from November. (Source: IE)

Vehicle manufactures may not have pushed too many vehicles to their respective dealers in December because of the already existing inventory from November due to poor retail sales as a result of demonetisation. Manufacturers also do not want to increase inventory of car manufactured in 2016 so that dealers don’t have to give steep discounts to sell them in the beginning of 2017. As a result auto sales during the month is expected to remain lukewarm opposed to past years when sales in December used to be quite robust.

In order to cut down on the production car makers have extended the days of shut down in their manufacturing capacities in December. MarutiSuzuki was one of the few manufacturers to register growth in the wholesales volumes last month since dealers needed to fill the gap in the inventory left by a record retail sales growth in festive month of October.

According to RC Bhargava, chairman, Maruti Suzuki, bookings of vehicles for Maruti fell by 20% y-o-y in November after the announcement of the demonetisation and it picked up by 7% y-o-y in December. “Maruti has a policy of minimising dealer stocks at the end of the year,”added Bhargava.

The second biggest car maker Hyundai is left with only 40,000 units to be distributed among its dealers. According to a senior executive Hyundai has manufactured 5 lakh units for the domestic market this year, and though the bookings have come down, Hyundai will try to finish the stock with the existing dealerships by giving higher discounts. So Hyundai like the Maruti is unlikely to push much of its vehicles in the market in December.

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Retail and wholesale volumes in December traditionally remain very high since dealers offer huge discounts to finish of the existing stock but this year due to sudden and significant decline in volumes in November, dealers are left with huge inventory after the festive season.

“In the last 10 years, vehicle sales in December have been the highest,” added Bhargava of Maruti.
Wholesale volumes of heavy commercial vehicles may also decrease in December since dealers are left with huge inventory as trucks sales have fallen by almost 40% in November. According to sector analysts most of the heavy vehicle manufacturers have cut down on the production and may not push enough vehicles in the market.

Same may be the case with the wholesale volumes of scooters and motorcycles.

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