Auto companies announce plant shutdowns ahead of festive season

With no respite in retail sales, top OEMs (Original equipment manufacturer) are announcing plant shutdowns ahead of festive season. Tata Motors has halted production at its Jamshedpur plant on August 16 and 17. Hero MotoCorp has decided to shut down manufacturing facilities from August 15 to 18.

Independence Day, Raksha Bandhan and a long weekend have also added to plant shutdowns but it’s hard to deny that the auto sector is bracing for more shutdowns to adjust inventory in light of lackluster demand for over a year now. As the BS-VI deadline draws close, all OEMs want to prevent an inventory pileup which would lead to a distress sale in the end.

No work days in vehicle manufacturing units have a direct impact on component manufacturers. Vinnie Mehta, DG, Auto Components Manufacturers Association said, “All component manufacturers are resorting to 1-2 days of shutdown per week because of production slowdown. The industry is either cutting down on shifts or number of working days to adjust to lack of demand”.

Bosch in a regulatory filing has said that it would be observing ‘No Production Days’ at various plants up to 10 days per month in the second quarter. Lucas TVS has announced August 16 and 17 as non- working days. Sundaram Clayton another TVS group company has also announced August 16 and 17 as non-working days due to business slowdown.

Tata Motors had earlier announced shutdowns from August 1 to 3 and 8 to 10. at its Jamshedpur plant. A Tata Motors spokesperson said, “External environment remains challenging, leading to demand contraction. We have aligned our production to actual demand and adjusted the number of shifts and contractual manpower”.

Hero MotoCorp in a statement to exchanges 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. In line with this trend, our manufacturing facilities will be closed from August 15 to 18. 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”.

According to data released by Society for Indian Automobile Manufacturers, the sector slashed production by over 11 per cent in the month of July. Commercial Vehicle production came down by 26 per cent and Passenger Vehicle production came down by 16.5 per cent.

Commercial vehicle maker Ashok Leyland had shut down its production facility for 9 days in July. Mahindra and Mahindra in a regulatory filing said that it would be shutting down production facilities for 8-14 days in the second quarter. Market leader Maruti Suzuki cut production by 25 per cent in July for the sixth month in a row.