In yet another sign that all is not well in the automobile sector, Mahindra & Mahindra will stop production at its plants for up to eight days this month to reduce the inventory pile-up.
M&M is the latest to join other automakers that have stopped production for short periods, due to the economic slowdown.
The “no production days” are part of aligning production with sales requirements. Mahindra Vehicle Manufacturers Ltd, M&M’s wholly-owned subsidiary, would also stop production at its Chakan plant in July for about eight days, the company said in a filing to the BSE on Thursday.
M&M, which has manufacturing units at Chakan (near Pune), Nashik and Haridwar, said the move would not impact the availability of vehicles as it has ample stocks.
For the Mumbai-based company, domestic sales fell 7.04 per cent in June to 36,207 vehicles (38,951 units in June 2012). M&M makes SUVs (Quanto, XUV500 and Scorpio), two-wheelers, commercial vehicles and farm equipment.
On Thursday, M&M shares closed at Rs 918.25 on the BSE, up 0.70 per cent against the previous close. Persisting weak demand has forced automobile companies to temporarily stop production as a precaution against inventory pile-up. In June, auto sales had skid for the eighth consecutive month, with most companies reporting lower sales due to rising fuel costs and high loan costs.
The falling rupee added to the woes as it led to an increase in manufacturing costs.
Other companies
Market leader Maruti Suzuki India reported a 12.56 per cent dip in total sales (including exports) in June compared with the same month last year, but for Tata Motors the fall was 18 per cent. While Hyundai bucked the trend with a one per cent rise in sales, luxury carmakers were not impacted.
Revised Rating
On Wednesday, India Ratings & Research revised its outlook for the automobile industry to ‘stable-to-negative’ from ‘stable’.
This is the first time in six years that the agency, a Fitch Group company, has revised its outlook for the sector.
According to reports, Maruti Suzuki had a planned shutdown for two days in June.
The New Delhi-based company had also asked 200 contract workers to go on indefinite leave as part of measures to cut diesel engine production at its Manesar plant.
In January, Tata Motors took a three-day block closure at its heavy and medium commercial vehicles plant in Jamshedpur, which followed a series of shutdowns during the fiscal.
Later in March, the automobile maker had shut its Jamshedpur plant for 11 days, citing repair and maintenance work.
(With agency inputs)
rajesh.kurup@thehindu.co.in