Tata Motors, India's leading commercial vehicle (CV) maker, said today that it will observe a 'block closure' at the CV-making plant of Jamshedpur for three days, starting November 6. Last month, the company had axed more than 300 temporary employees from the same facility.
The closure is attempted at realigning its production of tractor-trailers, multi-axel heavy commercial vehicle (MAV) and tippers to suit demand. "To avoid build up of inventory either in the company or with our dealers, Tata Motors will undertake a block closure," stated the company replying to a questionnaire.
This is for the first time in the last seven years that the company has shut down a production facility. It had exercised a similar 'block closure' in 2001.
Furthermore, the company said: "About 95 per cent of commercial vehicles are purchased through financing. Unavailability of finance, coupled with high interest rates, is forcing customers to postpone purchases. We are keeping a close watch on the market scenario."
Meanwhile, Chennai-based Ashok Leyland, has not taken a decision yet on the shutting production at its manufacturing facilities, but has said that it will look to downsize the inventory in the coming months. The company will cut production this month and the following month.
Similarly, Eicher Motors, India's fourth largest CV maker, has clarified that it will not shut down or reduce working hours at its plant based in Pithampur, but will to moderate production to suit demand.
"Our plant capacity stands at 4,000 units a month. We had trimmed down our production during the last month. Apart from the 2-3 days holiday of Diwali, we have not stopped production work at Pithampur," said the company spokesperson.
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The CV industry, especially the medium and heavy commercial vehicle (MHCV) sector, has been facing rough weather in recent months due to a cyclical downturn in the economy, which has lead to a drop in usage of commercial vehicles, mainly heavy trucks in sectors like real estate, mining and other construction activities.
To give an indication, the MHCV segment witnessed a drop 2 per cent in sales during the six months ending September 2008, with sales of 95,523 units as against 97,498 units posted in the same period a year ago. Tata Motors commands a share of 64 per cent in this segment, according to figures provided by the Society of Indian Automobile Manufacturers (SIAM).
Most of the CV making companies have been building up inventory expecting a reduction in interest rates and relaxation of lending norms from banks. The beneficial steps taken by the Reserve Bank of India, experts say will take at least a month to be passed on to the customers.