A day after reporting a 36 per cent year-on-year drop in sales — its steepest so far — in the domestic market in August, Maruti Suzuki India on Monday said it has reduced output by 34 per cent (y-o-y) during the month, its seventh consecutive month of production cut to align output with reduced consumer demand.
With sales of automobile products across segments in the slow lane for the past straight 10 months now, almost all manufacturers of passenger vehicles and two-wheelers have been resorting to production cuts in the past 6-7 months to clear unsold inventory. In a stock exchange notice on Monday, Maruti said it produced a total of 111,370 units last month.
The cut has been the sharpest — 63 per cent y-o-y — in the mini segment, comprising cars like Alto and WagonR with the company rolling out just 13,814 units. The segment sales dipped 71 per cent y-o-y at 10,123 units in August. For the first time in many years, production of utility vehicles (UVs) dipped by a little over 35 per cent.
Maruti Suzuki chairman RC Bhargava had last month said production will follow the market demand, and employment is related to the production volumes.
Maruti had cut output by 25 per cent y-o-y in July, while in June and May the cut was 15.6 per cent and 18 per cent y-o-y, respectively. The company had cut production by 10 per cent in April while in March, the cut was just under 21 per cent. Maruti had first cut production in February as dealers were saddled with inventory ranging from 45-60 days after Diwali last year when car sales lagged expectations, while most manufacturers continued to push stock to the dealers.
While the company has been putting out official production data since January, production cuts of nearly 30,000 units, are understood to have taken place in December 2018 too, as stocks had piled up after a subdued festive season. Even though production normalised in January with sales picking up slightly on the back of discounts, most dealers today are sitting on around 35 days of stocks.
Even others have resorted to production cuts as the industry is going through one of its roughest patches in the last 19 years. Mahindra & Mahindra had shut production across plants for up to 13 days in the April-June quarter and recently said it would shut production for 8-14 days in the July-September quarter to adjust stocks to market demand. Others including Tata Motors, Honda Cars India and Renault-Nissan alliance had shut down their plants for anywhere between four and 10 days in May-June. The companies have been trimming output since January this year. —FE
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