Automakers in India are in the throes of deep despair. Two and four wheeler automakers are being faced with rising stocks and rising inventories due to a weak market sentiment which has been extending over the past 7 months.
As per the latest census, at the start of June 2019, there are around half a million passenger vehicles worth $ 5 billion (Rs.35,000 crores) lying unsold in company dealerships. In the two wheeler segment, this figure stands at 3 million units valued at $2.5 billion (Rs.17,000 crores).
To counter these rising stocks, both four and two wheeler makers in India had decided to shut plants for extended periods. These shut downs started in the month of May itself with Maruti Suzuki, Mahindra and Tata Motors suspending production in the past month.
Maruti Suzuki plans a second round of shutdown from June 23-30 while Mahindra stated that its manufacturing unit, Mahindra Vehicle Manufacturers will have no production days from 5-13 days in the first quarter of 2019-20.
The Tata Motors’ Sanand plant was shut from May 27 to June 3 while the production unit of Honda Cars India was shut down from June 5-8. Renault Nissan and Skoda Auto also plan another round of shut down from 4-10 days during June 2019 for scheduled maintenance.
This shutdown will reduce industry output by 20-25 percent during the May-June period which will put less pressure on company stockyards and dealerships. The dealers have to contend with rising inventory as much as 50 percent over normal while they also have to pay GST on unsold stocks putting them under severe financial constraint.
Maruti Suzuki, the country’s largest automaker has the capacity to manufacture 15.5 lakh units at its two facilities in Gurgaon and Manesar. The company is dealing with inventory of around 50,000 vehicles as compared to an average of 25,000-30,000 cars.
Hyundai Motors on the other hand has managed to show off better results, buoyed by the recently launched Venue. Though the company’s domestic volumes dipped by 5.6 percent to 42,502 units in may 2019 as against 45,008 units sold in May 2018, the company made up in exports with volumes as high as 50.8 percent shipping 16,600 units in May 2019 as against 11,008 units in May 2019.