Yamaha Motor recently made it known that it was delaying the commissioning of its two-wheeler plant in Chennai by a year as it did not make sense investing in a slowdown.
Just some months earlier, Maruti Suzuki’s Chairman, R. C. Bhargava, announced that the company would, likewise, be late readying its new facility in Gujarat. Once again, the reason cited was the dismal scenario all around.
It is not just sales, production of most categories of vehicles was down in the first half of this financial year over the same period last year. During April-September, passenger vehicle production was down a little over 2 per cent at 1,523,654 units, that of commercial vehicles dropped nearly 12 per cent to 363,714 units, with the numbers for heavy and medium commercial vehicles falling over 21 per cent. Among two-wheelers, production of motorcycles and step-throughs was marginally down at 5,960,264 units while mopeds fell 11 per cent to 346,350 units. In April-September 2013, while passenger vehicle sales fell 5 per cent to 1,200,792 units, commercial vehicles dropped by 15 per cent to 3,26,648 units, of which medium and heavy commercial vehicles fell by a steep 25 per cent to 105,497 units.
Karl Slym, Managing Director of Tata Motors, told a newswire in Johannesburg that it was imperative to look for business opportunities across the world especially when India was collapsing.
Pravin Shah, Chief Executive of Mahindra & Mahindra’s Automotive Division, recently told Business Line that this was the worst slowdown he had seen in many years. What was especially worrying, he added, was the commercial vehicle segment which had been languishing for nearly 18 months.
Has the Indian auto industry reached an all-time low? Or, will things get even more dismal in the coming months? If Yamaha has chosen to go slow with its Chennai facility, Honda is on overdrive with its two-wheeler plans. It is now tipped to announce Gujarat as its fourth plant in India and see its capacity zoom to over six million units.
“Not every automaker is a Honda,” quips an auto industry executive, a clear pointer to the state of affairs. After all, companies such as Maruti and M&M have laid off contract workers over the last few months. There are many others, including component makers, that are trimming their workforce and the overall layoffs are estimated to be over 15,000.
This figure will only grow as sales continue to sputter and could spawn serious law and order issues as angry workers begin to protest. In these times of inflation, a job loss can really hurt.
Things were pretty dicey during late 2008 when the Lehman crisis broke out and sent the world into a tailspin. In India, sentiment had nosedived and it required the Centre to announce excise duty cuts for cars which did the trick and saw sales soar.
So what has gone wrong this time around? A section of the industry believes that rising fuel prices have deterred customers from buying vehicles. The Centre’s decision to increase excise duty on SUVs was another dampener and sales of this higher priced category crashed by 27 per cent in April-September this fiscal.
An auto CEO, who does not wish to be named, says that the writing was on the wall all along. “The growing current account deficit was there for all to see. GDP numbers were falling, there was zilch job creation and, yet most of us lived in denial simply because we did not want to accept the truth,” he adds.
For the auto industry the only silver-lining was the two-wheeler segment where sales were up nearly 4 per cent at 7,016,971 units, driven by a 17 per cent increase in sales of scooters and scooterettes, while motorcycles and step-throughs were up by about 1 per cent at 5,014,123 units.