The prolonged economic slump and high interest have slammed the brakes on truck sales, forcing companies like Tata Motors to clear their inventory pile-up
These are trying times for automobile companies, especially commercial vehicle manufacturers. The prolonged economic slump and high interest have slammed the brakes on truck sales, forcing companies like Tata Motors to take some drastic measures to clear the inventory pile-up. The country's largest truck-maker is offering hefty discounts to push sales, even as it is going slow on production. Company sources say in the case of some heavy trucks, the discount is as high as Rs 5 lakh per unit.
Industry experts say such desperate measures are not completely unexpected of. "Nobody expected the commercial to slow down so much, although there was anticipation of some sort of reduction in demand, and that is why companies have little option, but to provide heavy discounts", said Abdul Majeed, Auto Practice Leader at PricewaterhouseCoopers.
Company sources say Tata Motors's Jamshedpur plant is now operating at 35-40 per cent capacity thanks to the inventory pile-up. In November last year, the company was forced to announce production cuts at the Jamshedpur facility for more than 6 days, while its Pune plant was shut for 3 days to align production with demand. The sources say the drop in demand is drastic for heavy-duty trucks in the range of 12 to 25 tonnes.
Commercial vehicle dealers say other automakers like Ashok Leyland and Eicher Motors are also offering big discounts, to clear the backlog. They say for some specific models, the discount is as high as Rs 2 lakh.
Truck sales have been on a steady decline through last year. Between April and November, sales fell more than 16 per cent. Tata Motors took a big beating in December, when it barely managed to sell 9866 trucks, a big fall from 18,247 units in December 2011. Ashok Leyland too saw its sales tumble 19 per cent.
Industry experts say an immediate pick-up in sales is unlikely, because of the weak demand from fleet operators. They also cite the weak outlook by the Society of Indian Automobile Manufacturers, which has projected negative growth for the sector this year.