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Demonetization effect: Automakers cut production due to low demand

Demonetization effect: Automakers cut production due to low demand

Snapshot: Indian auto industry was improving quite fast with growing sales before the announcement of the demonetization, but as soon as the news broke, the sales number dropped drastically. According to various sources, the black economy was a major source, when it comes to the flow of cash into the auto industry, and now with the eliminated black money, the sales took a major hit.

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The Indian automotive sector has taken a major hit since the government of India has decided to demonetize higher value currency notes. Both the used and new car sales have taken a hit, and some of the sectors have noticed a major dip in their sales of up to 65%. In order to tackle the debacle, the automakers have decided to cut the number of production of their vehicles.

While some of the manufacturers have reduced their production rate, brands like Daimler Mercedes have suspended the production for three days, which will help the German company to clear its inventory. Renault and Nissan also have closed the third shift of their plant in India.

Indian auto industry was improving quite fast with growing sales before the announcement of the demonetization, but as soon as the news broke, the sales number dropped drastically.  According to various sources, the black economy was a major source, when it comes to the flow of cash into the auto industry, and now with the eliminated black money, the sales took a major hit. Many brands like Renault, Nissan and Datsun are coming up with the options of cashless payments. Honda has also partnered with with HDFC, ICICI and Axis Bank in order to provide 100% finance to new customers. 

These steps has been taken in order to tackle the massive 30% overall drop in the automotive sales figure. The Federation of Automobile Dealers' Association (FADA) has asked the OEMs  to reduce inventory at dealerships and to come up with better financing options in order to improve the sales numbers. As per industry sources the automotive industry might take up to 6 months in order to reach back at its normal level.

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