Renault-Nissan is set to begin massive downsizing of workforce at their Chennai plant due to falling sales and piling inventory.
Setting up a huge plant in anticipation of huge surge in sales seems reasonably easy for the global giants riding on big financial resources. This has led to them building huge factories in India as land is given to them at cheaper prices in anticipation of growing employment. Labour is available for cheap in India which helps them reduce costs and make India their export hub too. But, sometimes sales forecasts go horribly wrong and that is when the company realises that it is bleeding badly due to such plants. Renault-Nissan is the latest to realise the same.
The two companies had setup a production plant in Tamil Nadu which was the largest car plant in the country back then. With a production capacity of 4,00,000 cars every year, it is a mega factory. In the initial phase, the company did find sales to be rising in the Indian market and this was majorly due to the Renault Duster which got the first mover advantage in the compact SUV segment. Later on, the Nissan Terrano which is basically a re-badged Duster added volumes too. Exports were also being done from the plant but in limited numbers. However, with the competition now catching up, sales for both the brands have fallen.
The recently launched Renault Lodgy hasn’t been able to be an outstanding success which has led to a huge inventory pileup at the plant as well as dealerships. If reports are to be believed, around 4100 units of the Lodgy are standing in the plant yards with around 5140 Dusters accompanying them. Dealers across the nation are sitting on 10,500 cars which is a huge number. With both the brands drawing only 4000 units instead of the earlier 12,000 units, production has to be cut down. Along with the production cut comes the dismissal of 3000 employees which includes trainees, casual workers and apprentices.
Source – EconomicTimes.com