To avoid inventory pile-up due to dwindling demand for its passenger cars in India, Toyota Kirloskar Motor Pvt Ltd has decided to cut output through 'production holidays' up to eight days in a month at its Bidadi car plant near Bengaluru.
“We have an inventory of 3,000 cars at our factory.
"To avoid further pile up of inventory and adjust with the pace of demand for vehicles, we have started taking production holidays up to eight days in a month from the last quarter.
"There is no other choice for us,” Shekar Viswanathan, vice-chairman and whole-time director of TKML, told Business Standard.
Toyota has set up two manufacturing plants at Bidadi, about 35 km from here, with a combined capacity of 310,000 units a year.
The company sold around 190,000 units in FY13. In the current year, it expects the sales to be less than last year.
“We don’t want to make any predictions on sales this year given the current market sentiment.
"Car buyers are holding on to their purchases. Interest rates are set to go up further making things difficult for buyers and manufacturers,” he said.
Earlier, the firm had projected its sales for FY14 to be around 300,000 units level. However, considering the current slowdown in demand, it does not expect to be better than last year, Viswanathan added.
This May, Toyota sold 10,023 units -- a decline of 35 per cent over the same month last year.
In June, it sold 13,805 units, down 19 per cent year-on-year (y-o-y) and 14,470 units were sold in July, a fall of 10 per cent, y-o-y.
“We will be producing less than what we sold last year.
"We have to catch up with all the four months’ sales loss seen this year between April and July. Only then can we think of achieving growth.
"We are currently operating only two shifts. We never reached three shifts in our second plant,” said Viswanathan.
He added the company was considering introducing early retirement for its older employees, while new recruitments have also been stopped.
Subdued demand for passenger cars and rupee depreciation have affected the company’s expansion plans, said Viswanathan, adding the company might delay setting up a diesel engine plant in India.
“Although we don’t want to delay setting up of a diesel engine plant, the parent company in Japan is yet to give final approval for it. Also, there is not much volume in diesel car sales.
"Once we achieve a critical mass of over 200,000 diesel vehicles annually, it makes economic sense for us to rush to set up diesel engine plant in India.”
Image: Cars are inspected at the end of the production line at the Toyota factory; Photograph: Darren Staples/Reuters