fiscal's low base, capacity utilisation is now 30-40% for most players, according to analysts. Tata Motors has an annual installed CV capacity of 8.24 lakh units across plants in Jamshedpur, Lucknow, Pantnagar and Dharwad, plus an additional 5.49-lakh-unit capacity in Pune shared between CVs and its passenger vehicle range. Ashok Leyland, the second-biggest heavy truck maker, has seven plants across Alwar, Pantnagar, Chennai, Hosur and Bhandara with a combined annual capacity of 1.5 lakh units.
“While Tata Motors continues to be the market leader in CVs, we have seen the impact of the economic downturn, primarily because some of the key segments such as mining, infrastructure and the like continue to be stressed,” a Tata Motors spokesperson said.
“Alignment of production with demand is a perennial exercise. We closely monitor this, and take appropriate action,” the spokesperson said.
VG Ramakrishnan, MD at Frost & Sullivan, South Asia added that the CV industry works in a cycle of 3-4 years where sales dip about 30-40% during the low. “With drop in sales this year coming on the low base of FY13, capacity utilisation is now at a third for most companies. Every corporate says there is no dearth of money, but people do not want to spend. With lower demand for goods, there is now an excess capacity of trucks on the road and not enough drivers for new trucks either. Only if agricultural produce jumps after the monsoons can we expect an improvement,” he said.
This is the second year in a row of declining sales. In FY13, overall CV sales had dipped 2% at 7.93 lakh with medium and heavy CVs witnessing a 23% drop. But with LCV volumes jumping 14%, overall sales were not hit as hard. However, in April-June FY14, LCV volumes also fell 4% along with a 15.5% drop in medium & heavy CVs, leading total CV sales declining over 8% at 1.68 lakh units.
Job cuts, especially for contract labour, have already started as companies look to cut costs. In fact, auto majors such as Maruti Suzuki, Tata Motors and Ashok Leyland have already asked 200-400 such casual workers