Slowdown in Indian economy impacts hard on auto industry

Thursday 11 July 2013, 10:59 AM by

With fuel prices soaring high and interest rates remaining at steady upper limits providing a big time dent to the current economic scenario, auto makers in India face bleak hopes of sales picking up till the condition improves. “Unless the economy picks up and people get jobs, it is difficult for the industry to grow and car sales will fall. Costs have gone up so much, people can’t afford anything,” R.C. Bharagava, the Chairman of Maruti Suzuki India Limited was quoted as saying.

The situation has a ripple effect on every possible industry, let alone the automotive industry, Bharagava added. With regard to exports, the companies cannot fully afford to rely on exports either, as Maruti ships only 10 per cent of its entire sales in rest of the world. Regarding the auto maker's recent lay off in which it asked the temporary workers to go on leave to normalise the economic brunt, Bhargava said that this is a normal act in other similar industries and added that this process will continue, if the economy does not shows improvement.

Some Maruti sources disclosed that they had no option but to ask some 450 workers on contract to go on leave, resulted from the declining production of diesel engines, thereby reducing shift numbers from three to two per day. “It all depends on the requirement. If production is low, we have to reduce the workers,” said one of the Maruti official, while remaining anonymous.

Owing to a scheduled maintenance and to clear up the inventory, Maruti Suzuki kept its Gurgaon and Manesar plants closed for seven days during June 2013. According to filing with the Bombay Stock Exchange on July 8, 2013, the company's overall production dwindled by 25 per cent in June to 61,668 units, compared with 82,626 units during the same period previous year.

The car maker experienced dropped domestic sales, exports and market shares during the period, where the individual values; sales being down by 8 per cent to 77,002 units (83,531 units in June 2012), exports down to 7,453 units (13,066 units) and the shares of Maruti closed at Rs. 1,543 on the BSE on July 9, down by 0.56 per cent from the previous close.

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