Ashok Leyland to halt production for 5 days at Pantnagar as stocks pile up

Move follows slowdown in CV sales; No work on June 17 and 24, but employees will still get pay

The country's second-largest commercial vehicle maker, Ashok Leyland, has decided to halt production at its Pantnagar unit for five days as part of its strategy to align production with sales requirements. 

The company recently informed its employees that it decided to take corrective and austerity measures and curtail two "sixth days" in the month of June -- the 17th and the 24th, both being Mondays. The measures follow increasing vehicle inventories due to slowdown in commercial vehicle sales.

In an announcement to the exchange today, the company said as part of its strategy to align production with sales requirements, the Pantnagar unit will remain shut between June 24 and June 29 (both days inclusive).

"The company does not expect any material impact due to the same," Ashok Leyland said in the announcement.

Last week, in a notice to employees, a copy of which is available with Business Standard, the company said that due to volume correction and continuance of slowdown in the commercial vehicle sales and chassis movement, offtake is drastically reduced. Due to this, inventory of vehicles has piled up and therefore it has been decided to take corrective and austerity measures and curtail two sixth days in the month of June.

The company has decided not work on the June 17 and 24, though employees will be paid compensation for the non-working sixth days in June. 

The commercial vehicle industry in India continues to languish as retail sales dropped by 7.8 per cent YoY to 62,551 units in May from 67,847 units a year ago. This is the only segment that continues to be in the red, on a month-on-month basis between May 2019 and April 2019, while other segments reported growth.

New regulatory rules, softer freight rates and a liquidity crunch at non-bank lenders (which finance half the CV sales) are among the factors that impacted sales.

According to the Federation of Automobile Dealers Association (FADA), average CV inventory is 45–50 days.