The demonetisation move of the Central government has led to a decline in purchasing power and a massive slowdown in consumption. The used car market, which is believed to be three times the size of the new car market, too has been hit by the move, as people have put off purchases. The second hand two-wheeler market too has been affected.
Pre-owned car dealers say the move has brought down business by 20 to 30 per cent while the second hand two-wheeler dealers’ business has nearly been completely wiped out. The bulk of the used two-wheeler market consists of small businesses and is many times larger than the pre-owned car market.
Dealers in the used car market say that many people who have a lot of cash in old denomination currencies are said to be looking to dispose these notes off by investing in cars, gold and real estate. But car dealers have stopped accepting these notes.
“We have stopped accepting the old high denomination currencies and business has been very dull as not many people are willing to pay through bank transfers. Business has almost come to a standstill,” said S. Ramakrishnan, proprietor of Bhagavan Cars in Tiruchi.
“A person who came to us to buy a car valued at Rs. 75,000 did not turn up or answer calls after we asked him to pay through bank transfer,” he said. In Chennai too, Car City in Velachery has seen nearly a 20 per cent drop in business. “In the past week, walk-ins for enquiries have drastically dropped,” said Ashick, an employee. The firm buys and sells used cars on a commission basis.
However, those in the organised market like T.S. Mahalingam & Sons say they have not been affected as much as those dealing in cash.
“We insist on cheque payments, even for advance. Sometimes, people do give us a small token advance to book a car, but now that is the last thing they want to do given the current situation,” K. Mahalingam, partner, said.
According to him, the pre-owned cars market is two to three times the size of the new car market. “So, in a good month, the used car market might see sales of about 25,000 to 30,000 vehicles,” he added.
“This month, till date, there has been a 30 per cent drop. On an average, we sell about 200-250 cars a month. This is the short-term impact. In the long term, things will get better. For all we know, we might make up our average monthly sales in the next 15 days,” said Ravi Shankar, partner at TSM. However, both of them are optimistic about the market picking up in the days to come.
Two-wheeler dealers, however, are shell-shocked about the impact the demonetisation move has had on their businesses. “Since November 8, there have been minimal enquiries. Even if we inform potential buyers that we will take the Rs. 500 and rs. 1,000 notes, they are unwilling to take it forward,” Vadivelu, of S. S. Bikes, said.
Although Vadivelu said he has a card machine, customers are unwilling to spend any money now. “We sell about 30-40 vehicles a month. Not even one bike has sold till date this month.” Ganesh Balaji of Shri Balaji Autos said, “Business has been totally wiped out,” he says adding “I am not sure if this situation will improve at all.”
