The Modi government’s demonetisation move has triggered a cash crunch that has affected almost every sector. While its impact on those buying new cars in the Capital is yet to be ‘fully assessed’, those from the unorganised used car market say their business has “been destroyed”.
Small dealers worried
Industry estimates say that 2.5 to 3 lakh new vehicles are sold across the country each month as opposed to 3.5 lakh used vehicles (including vehicles transferred to new owners). While those in the organised, online car trade business have welcomed the move, small dealers of used cars complained that sales had fallen drastically.
They did not seem to be very optimistic about their businesses “ever reaching previous levels again.”
Registration lessened
According to a senior Delhi government official, while the cash crunch crippled the registration of vehicles across Motor Licencing Offices (MLOs) last week, business was expected to go back to usual – registration of 1,200 to 1,300 vehicles on a daily basis – soon.
“There was a dip in the number of people turning up for registration at MLOs last week due to lack of liquidity in the market. We will be in a better position to assess the actual impact towards the end of this month,” said the official.
Government statistics say that over 1,400 cars are added to Delhi roads every day.
According to figures from the Transport Department, over 6.4 lakh vehicles had already been registered in Delhi till July 31 this year.
Actual impact
“The unorganised car trade business in Delhi is substantial. It caters not only to those living in Delhi but several locations in the NCR as well as States like Punjab and Rajasthan. The announcement has brought sales crashing,” said a dealer of used cars from south Delhi.
Deals under danger
“Our business has suffered as potential customers no longer have the cash to purchase vehicles. Even previous deals have been affected with customers threatening to cancel if we don’t give them more time to make the final payment,” said another dealer based in east Delhi.
Dhruv Chopra, chief marketing officer, CarWale said, “The PM’s announcement has impacted the used car market. Just like in other sectors like real estate and retail, the short-term effect is that those planning to buy cars in the near future have immediately gone to dealers to book cars. This will sharply spike sales. But immediately after, we expect a fall in demand.”
Private financiers, on the other hand, said more enquiries were coming in from potential car buyers who were affected by the sudden curtailment in cash flow.
“Our contacts at car dealerships are calling on a daily basis to help provide bank drafts to customers turning up with reams of cash to buy vehicles – a service we are providing at a small commission,” admitted a private financier based out of west Delhi.
Our business
has suffered as potential customers no longer have
the cash to
purchase vehicles
