Auto Firms Cut Production By 11% In April-June, Says India Ratings

Indian automobile firms cut production by 11 percent in the April-June period of 2019-20 amid a prolonged auto sector slowdown, India Ratings and Research said in a report released on Wednesday.

Auto sales across categories declined by 12.35 percent to 60.85 lakh units in April-June period 2019, as against 69.43 lakh units in the same period of last year. In June alone, sales volume fell 12 percent year-on-year.

"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," India Ratings said in the report.

The production cut in the passenger vehicle segment was as high as 15 percent year-on-year while in the utility vehicles segment it stood at 2 percent year-on-year, the report said.

According to India Ratings, market leader Maruti Suzuki India Ltd. cut production by 15 percent to reduce auto inventory at the dealer level.

The average inventory for passenger vehicles declined to 30-35 days in June from 35-40 days in May, the report said. But contrary to industry-wide production cuts, Hyundai Motor India Pvt. Ltd. increased production by 3 percent in the April-June period.

In the commercial vehicle segment, Tata Motors Ltd. and Mahindra and Mahindra Ltd. curtailed production by 12 percent and 25 percent, respectively, due to high existing inventory levels. The average inventory level for CVs increased to 55-60 days in June from 45-50 days in May.

In the two-wheeler segment, Hero MotoCorp Ltd. cut production by 11 percent during April-June while Honda Motorcycle and Scooter India Pvt. Ltd. took a substantial cut of 23 percent.

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

Further production cuts, therefore, are likely to have continued in July as well.