Auto slowdown triggers partial shutdown of units

From the north to south of India, this has been the case with several biggies in the sector slamming the brakes in their day-to-day operations.

SCL, a TVS Group Company, and a leading Indian manufacturer and supplier of aluminium die cast products to domestic and global automotive OEMS, sent out a release stating that it has declared August 16 and 17, 2019 as non-working days for its Padi factory. “This is due to business slowdown across sectors,” the release further said.

Hero MotoCorp, the country’s largest two-wheeler manufacturer, also on Friday said its manufacturing facilities will be closed for four days (August 15 to 18) owing to “demand scenario”. Hero MotoCorp indicated it is undergoing a stressful period as it said: “While this has been part of the annual holiday calendar on account of Independence Day, Raksha Bandhan and the weekend, it also partly reflects the prevailing market demand scenario.”

Auto sector is one of the worst hit sectors in India due to the lack of consumption. The sectors has seen massive loss of jobs in just the last few quarters. Moreover, industry data recently showed that sales across all segments have declined for 9 consecutive month, creating recession like scenario in the sector. Hero MotoCorp is not the first auto maker to shut manufacturing. Earlier Tata Motors, Ashok Leyland, Mahindra and Mahindra, Lucas TVS, among others made similar announcements.

It also said production planning is a matter of advance monitoring of the market dynamics and prudent demand forecasting. “This helps us to plan our production well in advance, thereby enabling us to stay flexible both in terms of volumes and production schedules,” a regulatory filing said.

Lack of demand and forecasts not holding up due to weak economic sentiments, are pushing OEMs to re-align production to market demand. Additional days of inventory due to slow movement of secondary sales is adding to overall production slowdown forcing OEMs to work fewer days, says VG Ramakrishnan, Managing Partner-MD, Aventeum Advisors LLP. He likens the current scenario to 2000-01, saying that the impact of the slowdown will be comparatively tepid on the end users, owing to the emergence of shared mobility options, better public transport like metro rails in major cities.

On some of the big ticket launch events, he observes, that they are part of the regular product flow. These things are planned about five years in advance. “OEMs will continue to launch new products. As and when markets turn around, they can quickly gain or hold on to the market share. Otherwise, they stand to lose,” Ramakrishnan notes. Also in view of the BS6 transition, manufacturers will be forced to upgrade their portfolio. For instance, all Maruti vehicles are getting upgraded along with aesthetic changes (WagonR and Ertiga).

Venkatram Mamillapalle, Country CEO-MD, Renault India Operations, said the latest launch was keeping the Onam and Deepavali time-frame in mind. Office goers get bonuses and especially in the north, it is a practice of investing or buying something new for the family during auspicious days. There is no recession or peak time. Despite the so called slowdown, it is the communication to the customer predominantly about the product being right that determines the launch strategy, he added. Renault too has plans for a complete makeover for its Duster and Kwid variants.

Intensifying its efforts to find ways out of pressing issues of tax surcharge on the rich and a slowdown in auto and housing sectors, the Prime Minister’s Office will hold a meeting with top officials, including Finance Ministry’s five secretaries, again on Saturday while Finance Minister Nirmala Sitharaman said the government is still discussing steps of revival. On Saturday, the Principal Secretary PMO Nripendra Misra will hold meetings with senior Finance Ministry officials who are expected to come up with options and solutions on tackling the slowdown in auto and realty sectors and also on the equity market battering by FPIs, sources said. Sitharaman in Ahmedabad said on Friday that the ministry is still in talks with PMO in reviving financial sentiment.