Demonetisation: Tyre sales unaffected

Demonetisation: Tyre sales unaffected

By Sharad Matade

The impact of t he recent demonetisation of Rs500 and Rs1000 notes in India is less on tyre business than in the aftermarket as the trade between auto companies and tyre makers take place through banking and digital cashless transactions

The demonetisation of Rs500 and Rs1000 notes announced on November 8 shook the Indian economy at its core. Though the move had long-term justification citing the need of curb on black money, many businesses have been suffering as the liquidity was sucked from the market. However, there has been no major impact on tyre business, according to tyre dealers.
Whatever, the impact in tyre business is in aftermarket as the trade between auto companies and tyre makers take place through banking and digital cashless transactions.
“The almost 100% purchase of all categories of tyres from top tyre manufacturers, who have 90% market share, make sales only through cheques/ e- banking system over the years,” says S P Singh, Convenor, All India Tyre Dealers’ Federation ( AITDF). However, retail trades take various modes for money transactions, depending on the type of tyres, according to dealers.
“Our business has not been severely impacted due to demonetisation of Rs500 and Rs1000 but people are priorities their spending due to liquidity crunch and tyres purchase is not their first priority now,” a senior executive of a Nagpur-based tyre multi brand dealership, told Tyre Asia. The company has around 10 franchisees in the city. The Nagpur-based tyre dealer sells all major Indian and international brands in segments.
But the demonetisation has taken a toll on small tyre dealers in the interior places. According to Sachin Kachkure, proprietor, Adhira Tyres, located in Shendra MIDC near Aurangabad, cash transaction business is being hurt. “Since I am a sub dealer, I get different brand tyres from different tyre dealers. My both trades, with dealers and customers, happen mostly in cash. But now the business is getting affected.” Kachkure runs his business on one week credit basis and makes weekly payments of Rs35,000 to Rs50,000 to his dealers.
Though the Rs500 and Rs1000 were completly banned for any transactions, many customers tried to push the currencies for purchasing tyres. “While buying tyres, whether passenger vehicle or commercial, many people push hard to make payments in the demonetised currencies in every other way. Sometimes, few customers say they will buy tyres only if I accept the notes of Rs500 and Rs1000,” added Kachkure.
The demonetisation now has led his 50% business transaction through cheques. However, due to the less flow of currencies, many commercial tyre business is being on done on credits, he said.
The Nagpur sales executive also said that the demonetisation has led to an increase in cashless transactions. “Now our 90% business is taking place trough cashless transactions only,” says the senior sales executive. However, the impact of the demonetisation has not been much on sales of tyres.
“Our sales have not been much affected by the demonetisation, but due to overall slowdown. Though our sales are better than last year, but we are struggling to meet this year’s target,” he says.

Cashless transactions

Trade in the retail tyre markets is happened in different mode, depending on types of tyres. Commercial and mining sell business happen through digital cashless transactions. “In case of tyre sales for commercial vehicles 85% transactions are through Cheques/ RTGS/ NEFT as there is large portion of sales is through unsecured credit to truckers and bus operators across the country in retail tyre trade. When it comes to tyres for Off- the – Road( OTR) ,Mining and industrial tyres , which are high cost , are entirely purchased and sold to big firms through RTGS/ NEFT/Bank draft / cheques only,” says SP Singh.
In the case of passenger car/ SUV tyre sales, the dealerships have set up Place of Sale ( POS) to splice the debit cards/ Credit cards for accepting payments for new tyres and wheel alignment and balancing through computers. “Car tyre buyers are even before the demonetisation of the higher currencies used to prefer payments through either debit or credit cards. They have never been an issue,” Kachkure said.
However, sales of two wheeler tyres in retail is about 50-60% through digital mean and in case farm tyres cash sales dominate the retail market, while 95% of auto rickshaw and e- rickshaw tyres are virtually sold through cash. Now tyre dealers have set up e- wallet i.e. payment mode of accepting the sales of all types of tyres with focus on customers of two-wheeler and three wheeler tyres, tells Singh.
“Given, the overall scenario, tyre dealers purchases are only through banking network, but sales for key tyre are by digital method only over the years. Here most essential to take forward digital means of transaction is that banks should bring down the cost of providing POS debit/credit card splicing machines and bring down transaction charges by Cards to less than 0.7 % as against present high charges of 2% – 2.5% , which customers are reluctant to bear and tyre dealers or general trading community does not have capacity to absorb,” appeals Singh.

The impact of demonetisation has also not been seen on online tyre selling business, rather in long term, the e-portals for selling of tyres are likely to get advantage of the emphasise on cashless transactions. “We have not been affected like other sales channels, but I would not like to get into any numbers or data at this point.

“We would like to state that it is a move which in the long term will benefit online business in general, and we’re sure that changemytyre.com will be there when the positives are built up in this scenario, “ says Ankit Gupta Business Development Manager, at changemytyre.com.

The impact of demonetisation of Rs500 and Rs1000 currencies was seen on vehicles sales across categories, mainly two-wheelers. According to data released by the Society of Indian Automobile Manufacturers (SIAM). Domestic passenger vehicle sales spiked 1.82% to 2,40,979 units in November, as against 2,36,664 units in the same month last year. Car sales increased to 1,73,606 units as compared to 1,73,111 in November last year, however motorcycle sales fell by 10.21%t to 7,78,178 units, from 8,66,696 in November 2015. Total two-wheeler sales in November declined 5.85% to 12,43,251 units as against 13,20,552 units in the year-ago month. Sales of commercial vehicles were down 11.58 % to 45,773 units in November, SIAM said. Vehicle sales across categories registered a decline of 5.48% to 15,63,665 units, as against 16,54,407 in November 2015, SIAM added.

 

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