Auto makers ease up production as demand slumps

The last year had witnessed breakneck speed growth for the automobile industry and most of the major auto players were looking to increase the production due to surging demands. But this year, though there is still positive growth, the numbers are expected to be less and now it has been reported that with demand slowing considerably over the last few weeks, most car and sports utility vehicle makers are keeping production levels low and close to the retail level to suit the demand, which is set for a downward swing over the next two months.

According to a report in Business Standard, the industry witnessed a near nine per cent cut in production last month, compared to April. With demand this month being poorer than May, car makers say manufacturers fear lower production levels than last month. Hyundai Motor India Ltd (HMIL), the country’s second largest car maker, has been witnessing demand weaken over the past two months. The report quoted Arvind Saxena, director of sales and marketing, HMIL as saying “Market demand has been lower this month so far and sales could end lower than last month. Buying sentiment has been very weak.’’

The report also mentioned that according to data provided by the Society of Indian Automobile Manufacturers (SIAM), drop in production of cars was the highest at 11 per cent in May compared to April. Although manufacturers are tight-lipped about their output in the current month, they say meeting the levels of May seems difficult. As the market moved at break-neck speed till five months back, leaving many component makers lagging in meeting demand, vehicle makers, too, produced more resulting in piling up of inventory at the dealer end once demand dried up. Some companies like Mahindra & Mahindra and Maruti Suzuki are using the period of maintenance shut down to prune inventories at dealers. Both companies will see a week long shut down of their plants this month, according to the report.

It was mentioned that Pawan Goenka, president (automotive and farm equipment sectors) Mahindra & Mahindra said “Production is always tuned to suit demand, and no company would allow their inventory to go up substantially. In the case of M&M, too, production is tuned on the lines of the demand. Most companies take a maintenance shutdown and we too will be taking a week long shutdown this month. April and May have been lower in demand but I cannot comment on June as yet.’’