Prime Minister Narendra Modi's demonetisation of Rs 1,000 and Rs 500 notes in November has dented the year-end sales of carmakers. Automobile sales fell by 18.66 percent in December to 1.2 million units, the biggest monthly drop since December 2000, according to Society of Indian Automobile Manufacturers (SIAM).
Two-wheeler sales were the most affected. Sales fell 22 percent in December from the previous month -- one of the biggest falls -- to 910,235 units. Domestic passenger car sales dipped by 8.14 percent to 158,617 units, the most since a 10.15 percent drop reported in April 2014. The only segment that posted positive sales in December was light commercial vehicles, which grew 1.15 percent.
The SIAM report also says auto sales in rural areas has seen a big drop as cash is the main mode of payment in these regions. Large two wheeler manufacturers have also seen a big impact due to their high exposure to rural markets.
Apart from demonetisation, uncertainty over GST rate that India is gearing up to unveil later this year seems to have slowed auto sales. Some customers are also waiting for the regulations the government would announce at its annual budget on February 1.
For the calendar year 2016, Indian automobile sector sold a total of 21,901,572 units across segments and categories to record a growth of 9.17 percent. The auto sales in 2015 were 20,061,389 units across segments and categories.
Total passenger vehicle sales, which include cars, utility vehicles and vans, rose by 7.01 percent to 2,966,637 units in 2016. Sales of commercial vehicles increased by 7.67 percent and three-wheeler segment sales logged a rise of 6.12 percent to 545,732 units in last year. Overall sales of two-wheelers increased by 9.70 percent to 17,686,563 units in 2016.