Q1 will be challenging for auto firms

The auto industry will continue to be impacted by demonetisation for at least three more months, believe officials of Japanese automaker Toyota Motor Corporation’s Indian subsidiary Toyota Kirloskar Motor (TKM). While car companies appear to have bounced back in December when sales revived after it nosedived in November following the demonetisation, TKM Senior Vice-President & Director (Marketing and Sales) N Raja says this month’s recovery is owing to heavy discounts offered by companies and do not reflect the true market sentiment that remains negative. “The situation will ease once government lifts the cap on cash withdrawal. Till then, everyone wants cash at hand, even those who were not in a habit of keeping cash at home. Though 70 per cent of cars that are sold are financed, demonetisation forced a change in priorities among prospective buyers,” the official said. The 30-40 per cent decline in November sales had forced many firms to slash production to stop further inventory build-up. Even TKM, that maintains only two weeks’ inventory at dealerships, slowed down despatch. Most of the cars rolled off showrooms in November were booked earlier.