Demonetization: Automakers cut production as demand slumps

After the Government of India's decision to demonetize higher currency notes in the country, the automotive market has taken a major hit. Both - used car and new car markets have nosedived, with some sectors recording a drop of up to 65%. As a measure to tackle this slowdown, automakers have now started cutting production in order to avoid inventory pile-up.

Daimler is reported to have stopped production for three days in the last week and is planning a similar production schedule this week as well. Renault and Nissan have temporarily suspended the third shift of their production plant in Oragadam. Other manufacturers have reduced their production output, without making any changes to the shifts.

With the demonetization drive, the parallel black money economy, which was a vital source of the cash flow in automotive sales, has been eliminated from the system. This has caused an apparent sales slump in new as well as used car markets. Automakers have also introduced e-payments to tackle the dropping sales. Market experts suggest that it will take around 6 months for the automotive industry to reach its normal levels.

Source: ET Auto