Mahindra hit hard in November by demonetisation

It has been one month since Rs. 500 and Rs. 1,000 were declared illegal tender. The automotive sector, among several other industrial sectors, was also expected to be affected by the move. And that happened as expected, when sales numbers for the month of October came in. Car sales saw a sharp dip in both new car and used car sectors. November is generally a month which sees car sales go through the roof. This year, however, the demonetisation has changed things. Mahindra and Mahindra in particular was one of the most affected manufacturers from the demonetisation.

XUV500

The company saw a huge dip in sales by 24.29% in October 2016. The company sold only 29,814 units compared to 39,383 units sold in November 2015. The company’s top-selling products like Mahindra Scorpio, Mahindra XUV500, Bolero and Xylo were worst hit post-demonetisation. Other manufacturers who faced the heat from demonetisation were Honda, who sold only 8,029 units against the 14,712 units they sold in November last year, while Ford saw sold 6,876 vehicles against 8,773 units in November last year.

This is what Pravin Shah, M&M Chief Executive had to say,

“While we expected an improved auto industry performance on the back of festive season and other positive parameters such as rural demand and interest rates softening, the sudden announcement of demonetisation has brought in an immediate disruption and uncertainty.”
He further added that, “Although, demonetisation is a good and welcoming step in the mid to long term, this has dampened overall sentiments leading to postponed buying thereby resulting in a major dip in volumes during November.”

The Fall

The Mahindra XUV 500 has been worst hit among the Mahindra vehicles. The XUV500 is the best selling vehicle in the D-Segment with average sales around 3,000 units. This October, Mahindra sold only 1,069 units of the SUV. That is about 60% less sales. Other Mahindra cars like TUV300 sold only 1,357 units against the 3,022 units in October while the KUV100 sold only 1,183 units against  2,615 units in October. The evergreen Bolero’s sales were lower by 40.7% and sold only 4,939 units. Scorpio also suffered a 41% dip and sold only 3099 units against 5251 units in October.

The Reason

Mahindra has captured the rural markets over the years and has a very strong hold over the Tier II and Tier III cities of the country. These are the cities where most of the transaction happen in cash, without the involvement of cheque or online transaction. The less amount of cash has left villagers struggling for hard cash. Amidst all the cash crunch, the buying of new vehicles is obviously ignored and hence, the dipping sales of the products. Many other manufacturers have posted sales much lesser than the regular sales during the month of November.

What are manufacturers doing?

To tackle the situation, many car companies are offering huge discount on their products. To increase the footfalls in the showroom, manufacturers are also launching special editions and limited editions of the car models. While the situation may take months to come back to normal, companies have also started tying up with banks and financial institutions to provide loans of up to 100% of vehicle’s value including the road tax and registration. Many manufacturers have also tied up e-wallet providers so that the customers do not face any difficulty due to less liquidity in the market.

Car Sale Data Source: SIAM