Indian automobile manufacturers shut manufacturing plants temporarily to clear unsold inventory
The Indian automobile market is going through one of its lowest phases with drop in sales. And it is not just the automobile manufacturers but their respective dealerships too who are facing the heat with the ever increasing inventory. To find a solution to this situation, some of India's leading automobile manufacturers will be shutting their plants for several days which they believe could help them deal with the unsold inventory in the weak market. However, the same is also said to affect the projected production and sales targets.
According to an ET Auto report, more than half a million passenger vehicles worth $5 billion (nearly Rs 35,000 crore) are lying with the dealerships that have not been sold yet in the first week of June. The scene is equally terrible for the two-wheeler segment where the number is said to be $2.5 billion. Companies such as Tata Motors, Mahindra and Maruti Suzuki have already announced their plant shut down schedules between May and June. "What's the point in producing and pushing stock when the offtake is weak. We have calibrated our production based on demand in May and we will do so in June too," commented Mayank Pareek, president of the passenger vehicle division, Tata Motors.
These shutdowns by various automobile manufacturers are said to reduce the combined output by 20-25 per cent in the May-June period, states the ETAuto report. This will reduce the mounting stress of unsold inventory for the automobile manufacturers. This should also bring in some relief for the dealerships who have been bearing the loses as well as paying GST on unsold vehicles. Car manufacturers like Honda Cars India, Renault-Nissan and Skoda have already announced the different days of shutdown, Mahindra and Mahindra mentions, that its manufacturing unit, Mahindra Vehicle Manufacturers, would observe "no-production days" of between five and 13 days in the first quarter of 2019-2020. It said there were adequate stocks to serve market needs.
Mahindra Vehicle Manufacturers, would observe "no-production days" of between five and 13 days in the first quarter of 2019-2020
Maruti Suzuki's domestic sales for April 2019 stood at 1,31,385 units which was 1,63,434 in April 2018, marking a year-on-year (YoY) drop of 20 per cent. Contributing to this was the low demand for vehicles such as the Swift, Baleno, Celerio and the Dzire that saw a drop of 14 per cent. And this trend was also seen in its premium offering, Ciaz, with a sales drop of 45.5 per cent. The only gainers for the company were the utility vehicles (Gypsy, Ertiga, S-Cross, Vitara Brezza). India's largest utility vehicle manufacturer, Mahindra, too, has reported a decline in sales with 41,603 vehicles during the month of April 2019, as against 45,217 vehicles in April 2018, an eight per cent drop. This includes passenger car sales of 19,966 units this year as against 21,927 units last year. On the other hand, Tata Motors' passenger vehicles domestic sales in April 2019 at 12,694 units, witnessed a drop of 26 per cent, as compared to 17,235 units sold in April 2018. Tata mentioned the ongoing general elections as one of the reasons for low demands. Another big name in heavy commercial vehicles, Ashok Leyland clocked 10 per cent in their domestic sales numbers.
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