Shares of Mahindra and Mahindra Ltd. fell after a 21.8 percent drop in its November sales. India's leading SUV manufacturer sold 32,499 vehicles, compared to 41,590 units in the same month last year.
The decline was on account disruption caused by the "sudden announcement of demonetisation", the company said in its stock exchange filing.
Domestic sales fell 24 percent to 29,814 vehicles from 39,383 vehicles sold in the corresponding month last year.
While we expected an improved auto industry performance on the back of the festive season and other positive parameters such as rural demand and interest rates softening, the sudden announcement of demonetisation has brought in an immediate disruption and uncertainty. While it is a good and welcome step in the mid to long term, this has dampened overall sentiments leading to postponed buying thereby resulting in a major drop in volumes during November.Pravin Shah, President & Chief Executive (Automotive), M&M
Prime Minister Narendra Modi announced the demonetisation of old Rs 1,000 and Rs 500 denomination notes on November 8 in a bid to fight black money. The resulting cash crunch was expected to hit consumer discretionary spending in the near term, including auto sales, since a lot of these purchases are made in cash, according to a Kotak Securities report.
Exports were the only bright spot, rising 22 percent to 2,685 units from 2,207 units in the same month last year.
The decline in total sales was led by a 33 percent drop in passenger vehicle sales and a 34 percent drop in sales of utility vehicles.
Commercial vehicle segment also slumped 15 percent to 12,644 units, compared to 14,801 vehicles.
Shares of M&M were trading 1.3 percent lower at Rs 1,170 on the exchanges after the announcement.
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