Auto makers slash production by 11% in Q1 owing to declining sales: Report

Automobile manufacturers in the country slashed production by 11 percent in April-June period this financial year over the year-ago period amid the industry facing the worst slowdown with sales declining month after month, said a rating agency's report on Wednesday.

Vehicle sales across all categories declined by 12.35 percent to 60,85,406 units in the April-June period against 69,42,742 units in the same period of last year.

Domestic automobile industry's sales volume fell 12 per cent in June 2019 over the same month last year on weak consumer sentiments owing to the slowing economy amid delays in the onset of monsoons.

"The auto industry undertook a production cut of 11 percent in the June quarter over the year-ago period on account of production cut in passenger and commercial vehicles as well as two-wheeler segment, which stood at around 12 percent, 14 percent and 10 percent year-on-year, respectively," rating agency India Ratings and Research said in its report.

The production cut in the PV segment was as higher as 15 percent (YoY) while in the utility vehicles (UVs) segment it stood at 2 percent y-o-y, it said.

According to the rating agency, the market leader Maruti Suzuki slashed production by 15 percent following the slowdown in the industry to reduce inventory at the dealer level.

The average inventory for PVs declined to 30-35 days in June from 35-40 days in May, the report said, adding contrary to industry-wide production cuts, Hyundai Motor increased production by 3 percent over April-June 2019.

In the commercial vehicle segment, the top two players

Tata Motors and Mahindra & Mahindra curtailed production by 12 percent and 25 percent respectively, due to high existing inventory levels with the average inventory for CVs increased to 55-60 days in June from 45-50 days in May, it said.

In the two-wheeler segment, Hero MotoCorp cut production by 11 per cent during the period while rival Honda Motorcycle & Scooter India took a substantial cut of 23 percent year-on-year over April-June.

The 2W inventory at dealer level increased to 60-65 days in June , up from 55-60 days in May, the report said adding the Federation of Automobile Dealers Associations has requested the auto industry to bring down dealer inventory of 21 days by September.

Therefore further production cuts are likely to continue in July as well, given the existing high inventory levels, it added.

PV sales volume declined 18 per cent YoY in June driven by weak buying sentiment leading to the postponement of purchases.

CV sales volume declined 12 percent YoY in the previous month, owing to decreased industry demand on account of tight liquidity conditions, especially amongst non-banking finance companies, revised axle load norms, and delayed purchases owing to weak customer sentiments, as per the rating agency.

The two-wheelers sale also fell 12 per cent YoY in June on increased insurance costs, higher interest rates and weak rural demand amid delayed monsoon, the report said.