India’s Used-Car Market Collapses

Demand for used cars in India has plunged roughly 40% since the government’s decision two weeks ago to demonetize its 500- and 1,000-rupee notes. Intended to curb black-market activity, the move affects 85% of the value of currency currently in circulation.

An estimated 23 billion bank notes will be taken out of circulation by the end of December. Analysts say efforts to replace those bills with 2,000-rupee notes could take until May, leaving the country to struggle with a massive cash crunch.

India’s largely unorganized used-car market, which has been growing at more than 15%, handled about 3 million sales last year, according to The Economic Times. The Mumbai-based newspaper says more than half of sales are outside metro areas, and fewer than 20% of transactions are financed.

ET cites analysts who predict demand for used cars is likely to stabilize in January. The government’s aim to replace cash transactions with more electronic-based commerce should make the sales process more transparent.