With interest rates still high and fuel prices rising, Indian auto companies are not hopeful of a pick-up in sales till economic conditions improve, a top industry executive has admitted.
“Unless the economy picks up and people get jobs, it is difficult for the industry to grow and car sales will fall. Costs have gone up so much, people can’t afford anything,” R.C. Bharagava, Chairman, Maruti Suzuki India told Business Line .
He said not only the automotive industry, but overall, industries in India are going through a bad time because of adverse economic conditions.
Exports
The companies cannot depend on exports either, as not many are exporting and those who do have very limited numbers, he said, adding that MSIL exports “only 10 per cent” of its total sales.
On the company’s asking some of its contract workers at its Manesar diesel engine plant to go on leave in order to cut costs, Bhargava said this was the norm in other industries also, and that this (cutbacks) would continue if the economy does not improve.
According to sources in Maruti, the company has asked around 450 contract workers to go on leave, following cuts in the production of diesel engines and reducing the number of shifts from three to two a day.
“It all depends on the requirement. If production is low, we have to reduce the workers,” said a Maruti official, on condition of anonymity.
The company had shut its two plants in Gurgaon and Manesar for seven days last month for scheduled maintenance and also to clear its existing inventory. According to a filing with the Bombay Stock Exchange on Monday, the company’s overall production level was down by 25 per cent in June to 61,668 units, compared with 82,626 units in the corresponding month last year.
Drop in sales
Its domestic sales during the month were also down by around 8 per cent to 77,002 units (83,531 units in June 2012). Exports also fell to 7,453 units (13,066 units).
Shares of MSIL closed at Rs 1,543 on the BSE on Tuesday, down 0.56 per cent from the previous close.