Maruti, M&M Cut Production As Auto Sales Fail To Improve

Two of India's bigger automakers announced production cuts in the quarter ended June, suggesting that the sector is yet to emerge from the slowdown in sales since the festive season last year.

While Mahindra & Mahindra Ltd. informed the exchanges today that its subsidiary Mahindra Vehicle Manufacturers Ltd. would observe ‘no production days' of 5-13 days in the three-month period to meet reduced sales requirements, Maruti Suzuki India Ltd. said in a filing that it had cut car production by 18 percent in May—the fourth month in a row.

India's largest carmaker said its production fell as much as 18 percent year-on-year to about 1,51,188 units. The company said it made 18.88 percent fewer passenger vehicles—comprising Alto, Swift and Dzire—over last year, at 1,48,095 units.

Sales of automobiles have been declining since Diwali last year—a traditionally strong period for sales—due to higher upfront insurance costs and rising prices of vehicles as a weakening rupee led to increased costs of imported components. Automakers offered discounts to counter the trend, but that didn't help and led to increased inventory at dealerships. Production cuts followed, amid fears of an economic slowdown, employment growth dropping to an over four-decade low and a liquidity crunch in the markets.

Maruti Suzuki's segment-wise production cuts in May, as per its filing, are:

Compact Vehicles

• 9.54 percent reduction year-on-year to 84,705 units.

Utility Vehicles

• 3.22 percent cut over last year to 24,748 units.

Light Commercial Vehicles

• Production rose 51.54 percent year-on-year to 3,093 units.

Vans

• 35 percent decline over last year to 10,934 units.

The carmaker had cut production by 10 percent in April and 20.9 percent in March across units.