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Carmakers cut production due to low demand
Posted on 29 Jun 20121,901 Views Comments
Rising interest rates, hike in excise duty on cars in the Union Budget 2012-13 and fuel price hike has dampened growth of the Indian automobile sector. This has forced carmakers like Maruti Suzuki, Tata Motors, Hyundai and others to streamline production output
Aligning with shrinking demand, carmakers plan to cut a fifth of their production in July, as customers intimidated by high interest rates and spiralling fuel prices shy away from making purchases. Car sales continue to dwindle though the two-wheeler manufacturers remain largely unaffected.
The impact of the slowdown is largely felt by carmakers. In a cascading effect, component makers, including world's largest automotive component maker Bosch, are curtailing production by temporarily shutting plants and trimming shop floor timings.
Sources in the automotive industry said companies are facing a huge inventory of unsold passenger vehicles that stood at over three lakh units in May and is likely to have scaled to over four lakh vehicles in June. The inventory has overshot the normal 25-day levels for most companies, though petrol vehicles are much more affected.
Nikunj Sanghi, president of Federation of Automobile Dealers Association, the apex body of automotive dealers, said inventory levels, which generally pile-up in the second quarter, have peaked unusually in the first quarter. "In case of petrol vehicles, the inventory is as high as 45-60 days, which is very tough and has a huge impact on the dealer's profitability."
The scenario shows no signs of improving, forcing automakers to take some harsh measures, including temporary production cuts, as dealers wail of June being the worst month for sales in 2012.
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