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From zero down payments, big discounts to cashless transactions, auto makers get innovative to beat demonetisation slump

06-January-2017
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From zero down payments, big discounts to cashless transactions, auto makers get innovative to beat demonetisation slump

Since the announcement of demonetisation of high value currency notes, there has been a direct impact on sectors like auto, ecommerce, reality and FMCG among others.  In view of this adverse impact on major industrial sectors, the Asian Development Bank (ADB) recently reduced India’s growth forecast for the current fiscal to 7%, from 7.4% estimated earlier, on account of the effect of demonetisation.

Auto sales pre & post demonetisation

Talking about the auto sector in particular, the sales of all the major players like Maruti Suzuki, Mahindra and high end car manufacturers like Mercedes and Audi have witnessed dip in sales. This is starkly in contrast to the rigorous growth that the sector was witnessing prior to the demonetisation move. As per the sales figures released by the Society of Indian Automobiles Manufacturers (SIAM), the sales of passenger vehicles grew by 7.24 percent in April-March 2016 over the same period last year. Within the passenger vehicles, passenger cars, utility vehicles and vans grew by 7.87 percent, 6.25 percent and 3.58 percent respectively during April-March 2016 over the same period last year.

Source: SIAM

However, the sales report post demonetisation paints a grim picture of the auto sector. In December 2016, Maruti Suzuki saw a 4.4 per cent decline in sales. The sales of Wagon R and Alto witnessed a decline of 15 per cent year on year. Even the compact segment where the Dzire Tour has been the reigning champion saw a de-growth of nearly 29.2 per cent when compared to the same month in 2015. The sales of the Omni and Eeco also witnessed 17.1 per cent decline compared to the same period in 2015.

Passenger vehicle sales at Mahindra and Mahindra Ltd dropped 8% to 18,197 units over the year-ago period. The company has attributed the lower sales to the short-term effects of demonetisation as well as reduced and postponed purchase decisions.

Similarly, the impact of demonetisation is visible in the two wheeler segment too. The two-wheeler market leader Hero MotoCorp Ltd’s December sales skidded 34% to 330,202 units from a year earlier. Motorcycle volumes at Bajaj Auto Ltd dropped 11% to 106,665 units. Sales at TVS Motor Co. Ltd also fell 8% to 153,413 units, inclusive of scooters’ sales.

 Tackling demonetisation with innovative marketing mix

In order to tide over the slump in sales posed by demonetisation, some of the major auto makers and online auto sellers are adopting innovative marketing strategy to push sales.

Major car makers are not shying away from accepting the adverse impact on their sales post the ban on Rs 500 and Rs 1000 currency notes. Calling the current period as a challenging phase for the auto sector, Yoichiro Ueno, President and CEO, Honda Cars India Ltd. said, “After a severe impact of demonetisation in Nov’16, the Dec’16 sales continued to be challenging. We expect the New Year to gradually bring back normalcy in the market. During 2016, HCIL sold a total of 1,56,107 units in domestic market and we are thankful to our customers to have continued faith in the Honda brand.”

Sharing how Honda is using innovative marketing techniques to push sales, Jnaneswar Sen, Senior Vice President, Sales and Marketing, Honda Cars India Ltd, said , “In order to ease deal closure and give comfort to the customer we have negotiated hundred per cent on road and ex-showroom funding deals with HDFC, AXIS, and ICICI Bank. Most of our dealers also have started to waive the card charges or implemented cashless payment method for servicing payment. In order to support our dealers, we are putting the highest priority to avoiding piling up the stocks at our dealers.”

Even in the used cars segment, major players are adopting ingenious methods to keep the buying sentiment up. Explaining how used car players are deploying out-of-the-box marketing tactics to push sales, Shubh Bansal- Chief of Marketing and Growth at Truebil stated, “In our case the overall impact has not been that much as we dealt with electronic payment methods even before the demonetisation move was announced. Moreover, we adopted a three pronged strategy to make it easier for our customers to buy cars and it included: incentivizing buyers with 2gm gold coins, reduction in booking price to Rs 2000 from Rs 35000 and the facility of ‘test drive at home’.  These were some of the new approaches that helped us to keep the sales going despite the cash crunch.”

“To combat the demonetisation slump, used car dealers have aggressively adopted the digital payment methods including payment wallets. Even used car loans have been made easily available”, added Vikram Alva - Head Used Cars, CarTrade.com.

Speaking about how the online auto marketplace is making it easier for customers  to do cashless transactions in a bid to counter the cash crunch faced by customers, Sandeep Aggarwal - Founder and CEO, Droom said, “We have invested very heavily in last two years to create India's most advanced end to end online transaction platform for automobiles.   Our online tools and technology such as Orange Book Value and Eco are the enabler of online transactions for automobile and the current change will accelerate adoption of these tools.  Finally, only 0.3% of total automobile transactions flow through online and this will be 8% to 10% by 2020.”

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