Production cuts the way forward for auto manufacturers in Indian car market

In one of the worst slowdowns in the past five years, auto manufacturers are scaling down production so as to reduce stocks at showrooms across the country.  Rising fuel prices, high interest rates and worsening economic conditions has resulted in a drop in car sales in India.  Most auto manufacturers are having to deal with piling stocks, and this is what is making them take a decision to reduce production.

General Motors, Maruti Suzuki, Hyundai, etc., have to tackle falling demand, low sales growth and severe competition.  While Maruti Suzuki has seen a 10% drop in output, Hyundai Motors plans on increasing exports to reduce inventory. Manufacturers of auto components too are severely affected as auto manufacturers are cutting down orders. According to SIAM, sales fell by over 24% in October and they have had to scale down their forecasts for the coming months as well.

Maruti Suzuki has cut production of their popular models like Alto, wagon R, Dzire and SX4 while Hyundai has increased their exports so as to avoid pile up of stocks in the domestic market.  Volkswagen has also cut production by as much as 20-25% along with general Motors who have reduced production of both Aveo and Beat.

Managing executive officer (marketing & sales) Mayank Pareek of Maruti Suzuki had this to say. “We had faced an unprecedented situation that led to significant drop in our production, which we are trying to make up now.” “But market conditions are getting stiffer as demand has shifted to diesel cars and our bulk sales come from compact petrol cars, so we may end the fiscal in a negative.”

Partner at PricewaterhouseCoopers India, Abdul Majeed had this to say.”Most companies are maintaining unusually high stock, especially of their petrol models and finding it hard to get enough customers to offload it.” “This is perhaps the toughest time experienced by Indian car companies where, besides fuel and interest rates, the global sentiment is also affecting purchase decisions.”

Arvind Saxena, Hyundai’s director (marketing and sales) had this to say. “In view of the sluggishness in the domestic market, we have shifted some production to our export lines. We enjoy this flexibility as we export to around 120 countries.”