Sales in passenger vehicle segment of Indian auto industry continue to drop off its share because of hike in petrol prices and increase in interest rates. Owing to this, several big players in the market are planning to close their manufacturing units for a short time in a bid to trim down cost of inventories.
Officials of Fiat India Automobiles Limited (FIAL) said that the company is going to shut down its production plant for some days in July 2012. Fiat further added that its petrol models are not doing well in the market and the company is presently engaged in scrutinising its inventories.
Fiat has established a manufacturing unit at Ranjangaon, Maharashtra in a Joint Venture with Tata Motors and will close the plant temporarily in agreement with its partner, Tata Motors. The latter will also impede the production of its commercial vehicles at Pune-based manufacturing unit for three days in the third week of June 2012.
Rajeev Kapoor, President and CEO, FIAL, quoted, “Depending upon the demand and inventory situation, we may shut down our plant for 2-3 days next month. Currently, we are monitoring the inventories at both raw material and vehicles production sides.”
Maruti Suzuki, India’s largest car maker, will also pull down the shutters on its manufacturing unit for a week from June 25 in order to kick-off its annual maintenance programme. In May 2012, the company had shut down the production of its petrol cars, including Alto, M800, A-Star, Estilo and Omni, for three days.
Joining the league, Toyota Kirloskar Motor (TKM) has optimised the manufacturing of its petrol models because of dwindling demand. Shekar Viswanathan, Deputy Managing Director (Commercial), TKM commented, “We are having some amount of inventory for our petrol cars and it has gone up to over 30 days.”
Company’s spokesperson further added, “Only a minor adjustment was made in production to balance out the stocks... This is just a rationalisation of production based on the demand and supply in the market. This is just a temporary measure.”
According to analysts, the total stock of unsold petrol models of varied car makers in May was more than 1.93 lac units, whereas the diesel models accounted over 1.07 lac units. In May, the passenger car sales increased at the slowest tempo in seven months, with a mere rise of 2.78 per cent. It is believed that the figures were mainly hit because of increase in petrol price and hiked interest rates, which are floating around 11 to 13 per cent. As per Society of Indian Automobile Manufacturers (SIAM), car sales in domestic market stood at 1,63,229 units in May 2012 against 1,58,809 units recorded in the corresponding period last year.
The dwindling demand is not only affecting passenger vehicle makers, but also putting pressure on commercial vehicle manufacturers. According to SIAM, in May 2012, the commercial vehicle production of the company reduced by 15.89 per cent and amounted to 33,271 units.
Spokesperson of Tata Motors said that the company has decided to shut down the production of light and medium commercial vehicles, including Tata 407 and 709. He further added, “Given the market scenario, we need to align our production. We will have a block closure from June 22 to June 24 at our commercial vehicle plant in Pune. Going forward, given the high interest rates, slowdown in mining and construction industries, the market has given resistance. Our inventory is under control and we want to keep it under control.”
