Maruti Suzuki India Limited, the country’s largest automaker had cut vehicle production by over 18 percent in May 2019. This follows a significant dip in demand that the company has been experiencing over the past few months. Production was cut by 8.3 percent in February, 21 percent in March and 10 percent in April.
The production cut in May has made it the fourth consecutive month that the company has had to resort to such a stand. Production in May was at 1,51,188 units, down 18 percent as compared to 1,84,612 units in May 2018. These figures included the Super Carry LCV production.
When not taking the Super Carry into account, production was cut across all segments such as compact and mini cars. Production of passenger vehicles was cut by 18.88 percent to 1,48,095 units as against 1,82,571 units produced in May 2018 while in the mini segment, production was reduced by 42.29 percent to 23,874 units as compared to 41,373 units produced in the same month in 2018. Dispatches to dealers also dipped 24 percent in May, the steepest monthly decline in the past 7 years.
Production of the mini segment, which offers cars such as the Alto, was cut by 42.29 percent to 23,874 units in May 2019 as compared to 41,373 units produced in May 2018. In the compact segment, DZire production as cut by 9.54 percent in the past month to 84,705 units as compared to production of 93,641 units in the corresponding month of last year.
It was also production of the Vitara Brezza in the UV segment that experienced a cut by 3.21 percent to 24,748 units as against 25,571 units produced in May last year while production of the Eeco van was also cut 34.99 percent to 10,934 units, from the 16,819 units produced in May 2018.
Market analysts peg this falling demand to a significant increase in price of cars following higher insurance premiums and in view of new safety features and BS VI compliant engines being made mandatory in India from 1st April 2010. In the past three months, buyers had also deferred purchase of new cars due to elections in the country. All these factors have hit retail demand in a very big way.
Smaller dealerships who could not afford to stay afloat, have started shutting down. As per a report, about 300 car outlets have shut down due to this decline across India. This has resulted in job losses of over 2,000 as well as financial loss of over Rs 2,000 crores.
Maruti is not the only car brand which has reduced production. Mahindra, Tata, Honda, Renault Nissan all have reduced production to meet slowing demand. Inventory levels at dealerships is at an all time high. Car dealers across India are sitting with unsold stock which is worth more than Rs 35,000 crore.