Automakers in trouble: Tatas, Maruti cut output

With the domestic auto market going on a downhill slide, Tata Motors and Maruti Suzuki have cut production as the automobile industry braces up for a single digit sales growth this fiscal.

Car makers, however, are hoping that a slew of upcoming new launches, including MSI's Swift, Honda's new Jazz and Brio, Volkswagen's Jetta, and the recently introduced Beat diesel by General Motors India will help revive the market.

"Our production is exactly as per demand. We keep in mind the need to keep inventories at both the company and dealers' end in balance," a Tata Motors spokesperson said.

If there is a requirement for adjustment in production, the company does it. At the moment there is a slowdown in demand, he added, but did not specify details of the cut.

In July, Tata Motors' car production was down 26.96 per cent to 19,985 units as against 27,362 units in the same month last year. Its domestic car sales were also down 43.13 per cent to 13,997 units.

Last week, Maruti Suzuki India had said it has cut production of most of its models, including the best selling Alto, by 5 per cent, during this month due to slump in demand in the domestic market.

MSI Managing Director and CEO Shinzo Nakanishi had said the company reduced production of all the models, except Swift and Dzire in August citing bad market conditions.

In July, MSI's car production was at 72,587 units, down by 21.08 per cent as compared to the same month last year, mainly due to non-production of Swift. Its domestic sales were down by 31.04 per cent to 52,483 units.

While admitting that the market is on a downhill drive, other firms like General Motors India, Honda Siel Cars India and Hyundai Motor India, however, have not taken such steps but are hoping that new launches will help sales counter ticking.

"The industry is in a bad shape. Yet, there are a lot of new launches happening. Any new launch gives an impetus to the market and that should help the market. Moreover, the festive season is round the corner and we are hopeful that the demand will revive," Honda Siel Cars India (HSCI) Senior Vice-President (Sales and Marketing) Jnaneswar Sen said told PTI.

This week Maruti is launching its new Swift, while Volkswagen and HSCI are also introducing new versions of sedan Jetta and hatchback Jazz respectively in the market.

General Motors India (GMI) Vice-President P Balendran said a lot of uncertainties like high interest rate and fuel prices were having a negative impact on auto sales.

"Earlier we were expecting double digits growth but it is likely to be only in single digit this fiscal. If the industry grows at 6-7 per cent, we should be happy," he said.

In July this year, domestic passenger car sales fell for the first time after 30 months of continuous growth, registering a 15.76 per cent decline mainly due to hikes in lending rates and fuel prices.

This is in contrast to the 29.72 per cent growth witnessed last fiscal to touch 19,82,702 units.

Despite the present situation, Balendran said General Motors India has not cut its overall output due to good demand of the newly launched Beat Diesel.

"As for other models, we have always produced based on demand, which we are continuing that right now," he added.

An official of Hyundai Motor India Ltd (HMIL) said the company is not contemplating any move to reduce production at present.

Last month, HMIL had produced 55,353 units, up 5.94 per cent as compared to July last year. Its domestic car sales were, however, down by 11.49 per cent to 25,501 units.

Sen of HSCI also said the company is maintaining production at 5,000 units a month level and there were no plans to change it at the moment despite the difficult market conditions.

"With the difference between petrol and diesel prices, there is a preference for diesel vehicles. We are the only manufacturer without a diesel car in our portfolio. Despite that we are managing well," he said.