Slowing sales of passenger vehicles in India are leading to inventory pileups for most carmakers and many are resorting to production cuts to tide over the crisis.
India’s largest carmaker, Maruti Suzuki, a unit of Japan’s Suzuki Motor Corporation, is now dealing with an inventory of some 50,000 vehicles, around double its average of 25,000-30,000.
Maruti Suzuki has the capacity to manufacture 1.5 million cars annually at its two facilities in Gurgaon and Manesar. It halted production on Monday and a similar production cut was ordered for a day in February, Times of India reports.
It has also been slashing its vehicle production for the last few months. In April this year, it cut production by around 10% across its factories, compared with April 2018. In March, it resorted to a production cut of 20.9% across its factories and in February it was over 8%, when compared with corresponding months last year.
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Toyota and Ford also slashed April production by 29% and 28% respectively, while Tata lowered it by 1%. The only car maker to buck this trend is Hyundai, whose new compact sports utility vehicle Venue is drawing lot of interest from buyers.
The Society of Indian Automobile Manufacturers (SIAM) has forecast that the demand for passenger vehicles will remain subdued and sales will grow by only a modest 3-5% for the year 2019-20. The industry body cited liquidity crunch and forecasts of a below-normal monsoon among the reasons for expecting slow growth.
In 2018-19 passenger vehicle sales grew 3.27%, the slowest in four years.
SIAM has also made a representation to the government to cut the goods and services tax rate on passenger vehicles to 18%, from the current 28%.
However, Pawan Goenka, the managing director of utility vehicle maker Mahindra & Mahindra, is hopeful that the passenger vehicle sales in India may beat SIAM forecasts. He expects the newly elected government to take aggressive steps to boost consumption and expedite reforms.