Automobile companies slashed deliveries to dealerships by 19% in December, the sharpest cut in last 16 years, as negative sentiment from the government's demonetisation drive and year-end inventory correction saw manufacturers pulling down stock levels at retailers. Total industry sales (wholesale volumes) stood at 12.2 lakh units against 15 lakh in December last year. While car sales were down by 8%, the sales of two-wheelers were lower by 22% (26% down for scooters and 23% for motorcycles). Deliveries of commercial vehicles were down by 5%, while three-wheeler volumes were lower by 36%. Rural markets have been severely impacted by the cash crunch even as companies work aggressively to line-up improved retail financing options. There have been production cuts by companies such as Honda, Mahindra & Mahindra, Volkswagen, Hero MotoCorp, Honda Motorcycles and Scooters, Bajaj Auto and TVS as they fall in line with the negative market outlook.
The last biggest crash was in December 2000 when companies had cut wholesale numbers by a sharp 22%, while the other major period that witnessed a sharp contraction was in late 2008 during the financial crisis. The decline in December was across segments, displaying the nervousness of the industry that is refraining from any build-up of inventory at dealerships.
Maruti Suzuki chairman R C Bhargava said companies have been trying to control unnecessary inventory build-up at dealerships, especially as 2016 models will be avoided in the new year.