Demonetisation to hit 2-wheeler sales

two-wheeler market, which started growing after flat sales for almost four years, will be hit by Prime Minister Narendra Modi’s decision to demonetise ₹500 and ₹1,000 currency notes as 45% of rural transactions were made in cash.

This is because villagers buy a motorcycle only when there is a good crop. They go to the mandi, sell the crop, and buy a bike with the cash. Most of this money is unaccounted for. “Rural sales will be hit … lack of currency notes will be a big hindrance,” said Amit Kaushik, India head of Detroit-based auto consultancy Urban Science.

In the past 48 hours, most twowheeler makers declined to comment on the development. Honda Scooters and Motorcycles cited “dealer sensitivity”. TVS’s public relations team said “the company wouldn’t be able to participate”.

Hero MotoCorp was forth- coming. “Cooperatives, grameen banks and non-banking financial companies will play a greater role in making this initiative a success … it will now be imperative to make more options of convenient financing available to customers,” said a Hero spokesperson.

Another two-wheeler maker spokesperson, who did not wish to be named, said even in loans, 20% of the down payment is in cash. The spokesperson further said a large portion of the sales will slowly convert into bank transactions. Even though the farmer is not interested in hiding his income, he doesn’t have a credit profile, making it difficult to disburse the money – impacting the ₹72,000 crore two-wheeler industry.

“The dealers have been happy selling vehicles in cash …. However, Modi’s ideology is to track where the cash is coming from ... now, purchases via credit and debit cards, demand drafts will go up,” said London-based auto analyst Deepesh Rathore.