Auto majors cut production, Maruti Suzuki to shut plants on Sep 7 and 9

With the automobile industry facing a severe slowdown and job losses over the past few months, Maruti Suzuki has decided to shut down the passenger vehicle manufacturing operations of Gurugram plant and Manesar plant in Haryana for two days.

September 7 and 9 will be observed as no production days, it said in a statement on Wednesday. The country's largest passenger vehicle manufacturer reported a 32.7 per cent decline in its sales last month. The company sold 106,413 units including exports as compared to 158,189 vehicles in August 2018.

Even other automobile makers have been reporting falling sales due to sagging consumer sentiment amid the economic slowdown.

"We also closed the plant for a day or two in August," said N Raja, Deputy Managing Director of Toyota Kirloskar. "If a company has more stock than sales, then we will have to make such decisions."

Tata Motors reported a 49 per cent slump in its domestic sales on a year-on-year basis at 29,140 units. The commercial vehicles' sales dipped 45 per cent to 21,824 units, it said. It sold 7,316 passenger vehicles in August, showing a decline of 58 per cent from 17,351 units during the year-ago month.

"Subdued demand sentiment due to poor freight availability, lower freight rates and a general slowdown in the economy continued to hamper commercial vehicle demand," said Girish Wagh, president of Tata Motors' commercial vehicles business division.

The auto industry employs over 3.5 crore people directly and indirectly and accounting for nearly half of India's manufacturing output. Government data shows the gross domestic product (GDP) grew at 5 per cent in April to June quarter compared to 8 per cent in the same quarter of 2018-19 due to weak household spending and muted corporate investment.

On Monday, the Society of Indian Automobile Manufacturers (SIAM) said there has been more than 30 per cent erosion of sales for passenger vehicles across the country.

The commercial vehicle and two-wheeler sales are also significantly negative, indicating that the market has still not responded to various measures initiated by Finance Minister Nirmala Sitharaman last month, said SIAM president Rajan Wadhera.

The series of announcements on credit availability and reducing the cost of credit that were made do not seem to have percolated down to non-banking finance companies (NBFCs), which support the bulk of finance for the automotive industry, he said.

"The consumer sentiment also continues to be low and there is clearly a trust deficit in lending money to the dealers," said Wadhera in a statement.

All this while, the industry has pulled out all stops in offering attractive deals and discounts to the consumers.

"However, the ability of the industry to provide large discounts is limited and this only highlights the need for government to consider reducing the Goods and Services Tax (GST) rates from 28 per cent to 18 per cent, which will significantly reduce the cost of vehicles and in turn create demand," he said.

Ashish Harshraj Kale, president of the Federation of Automobile Dealers Associations (FADA), said August auto sales were not very good and dealers are in a cautious mood.

"Manufacturers prefer to shut down the plant for a few days rather than cutting jobs. Our survey from April to July shows that dealers have cut 8 per cent of jobs across the country. SIAM reported 3.5 lakh job cuts of which 2 lakh jobs were slashed by the dealers.