Demand slowdown forces Mahindra & Mahindra to stop production

Demand slowdown forces Mahindra & Mahindra to stop production New Mahindra
author image CarTrade Editorial Team
Friday 02 August 2013, 19:11 PM

The slowdown in the Indian auto market has struck yet again, forcing the country's leading utility vehicle maker Mahindra & Mahindra to put a stop to its production activities for up to six days in the time to come. This step by the company has been taken largely due to the demand for vehicles, which is considerably less than what is being produced. Recently, it announced that the firm would stop manufacturing at its facilities all over the country for a period ranging from one to eight days, depending on the requirement.

Demand slowdown forces Mahindra & Mahindra to stop production

A statement released by the company read, "As part of aligning its production with sales requirements, (the company) would be observing no production days at its automotive plants for a period ranging from 0 to 6 days in the forthcoming months." Following suit will be Mahindra Vehicle Manufacturers Limited, a subsidiary that is completely owned by Mahindra & Mahindra. The subsidiary said in a statement that it would also be having no production days at its Chakan plant. A statement said, "The management would be having a close watch on the market conditions and would from time to time be reviewing such no production days to adjust production in line with the demand."

Industry experts feel that the immediate cause of this action taken by Mahindra & Mahindra is the decline it recorded for the month of July. According to statistics, the Indian auto maker recorded total sales of 37096 units in July 2013. This is 21.17 per cent less as compared to 47059 units that were sold in the month of July last year.

Notably, the prices of Mahindra & Mahindra's best selling cars, namely XUV500, Xylo, Bolero and Scorpio, were increased by the company to compensate for the raised excise duty. The Indian government hiked the excise duty on utility vehicles from 27 per cent to 30 per cent. Therefore, sales of these vehicles dropped significantly after the prices were increased, thereby leading to a decline.

The example of Mahindra & Mahindra clearly represents the kind of slowdown the Indian car market has been experiencing in the recent past. Numbers have revealed that the demand for cars in the country declined for eight months consecutively, which is an unprecedented statistic. Consumers have been bogged down by the economic crisis, which, in combination with the rise in fuel prices, reduced the demand for cars significantly.

According to numbers released by Society of Indian Automobile Manufacturers (SIAM), there has been a stark decline in sales of domestic cars in India. The domestic car market recorded sales of 139632 for the month of June in 2013 whereas it clocked 153450 units in the same month last year. With the festive season around the corner, companies are hoping for a turnaround of fortunes in the demand for passenger cars.

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