Manufacturing plants have been shut down for a few days to reduce inventory.
Top manufacturers in the automobile industry have halted their production for the ongoing quarter for several days. This announcement has been done so that the companies could get rid of the unsold inventory and prevent the piling up of products. This move will make it tough for the automobile industry to achieve its production and growth targets.
The estimated value of the unsold inventory lying around in warehouses is around Rs. 35,000 crores measured at the start of June. In the 2-wheeler industry, the estimated value is said to be around Rs. 17,500 crores. Maruti Suzuki, Tata Motors and Mahindra a part of the 7 out of top 10 companies that have announced plant shutdown between May and June. There are some who are done with the process and some that have scheduled the shutdown.
Officials at Tata have said that there will be no gains in pushing stocks in a weak market. The Indian automaker has reconsidered its production based on the demand in May and will be doing the same in June too. The shutdown period of May-June is likely to reduce the industry output by 20-25 percent and will result in a decreased pressure on the cramped stockyards at factories as well as dealerships.
Dealerships are the worst affected as the unsold inventory is 50 percent more than the normal and they have to pay GST on the unsold inventory too.
Maruti Suzuki, Mahindra and Tata Motors have halted production for several days in May. Along with these companies, Honda, Renault-Nissan Alliance and Skoda Auto plan another round of shutdowns spanning 4-10 days this month for scheduled maintenance.
Mahindra has mentioned that the manufacturing unit, Mahindra Vehicle Manufacturers, would imply no production days for 5-13 days in the first quarter of 2019-2020. This will be implied as there are adequate stocks to serve market needs. Also, company officials of Maruti Suzuki, Honda, Renault-Nissan and Skoda have mentioned that their shutdowns were planned.
Manufacturers Stop Production
– Due to excessive stocks in the stockyard and dealerships, the production has been halted for a few days
– The production shutdowns have been planned by many companies
– Dealerships are the worst affected by unsold inventory
Source – ETAuto.com