Ashok Leyland announces further production cuts

The segment that took the worst hit was the medium and heavy commercial vehicles, which saw sales of 4,035 units last month, against 13,056 units in the year-ago period, clocking a sharp fall of 69%.

By:Published: October 5, 2019 8:56:30 AM

Commercial vehicles manufacturer Ashok Leyland on Friday announced non-working days ranging from 2 to 15 days at several of its plants during October in order to align production with sales, as sales continued to see a sharp fall in September.

The announcement came in the backdrop of yet another month of disappointing sales for the company. The CV manufacturer reported a 57% decline in its domestic sales at 7,851 units in September, compared with 18,078 units same month last year.

The segment that took the worst hit was the medium and heavy commercial vehicles, which saw sales of 4,035 units last month, against 13,056 units in the year-ago period, clocking a sharp fall of 69%.

Sales of light commercial vehicles fell by 24% year-on-year. In September too, the company had halted production at five of its plants citing continuous lower demand for its products. The Ennore plant was shut for 16 days, Hosur 1, 2 and CPPS five days, Alwar and Bhandara for 10 days and Pantnagar was closed for 18 days. It later extended shutdown at its Ennore plant for five days going into October. In July, Ashok Leyland had shut down its Pantnagar plant for nine days owing to the weak outlook for the industry.

The plant was shut down in June as well due to similar reasons. According to Jefferies, channel de-stocking and extremely weak retail demand led to a 60%-70% decline in CVs sales across segments in September. It highlighted that MHCV down-cycles tend to be the most painful across different auto segments with the sharpest decline in volumes as well as margins.

According to analysts, the automobile industry has been facing challenges since the past three quarters in terms of additional burden of new insurance policy, constraints on loan disbursement from financial institutions and the higher axle-load norm impacting CV sales.

Wholesale dispatches of BS-IV commercial vehicles were lower, which also impacted year-on-year and month-on-month performance of the CV players to some extent. Production cuts were announced by other vehicle manufacturers due to the slowdown.

The country’s largest car manufacturer Maruti Suzuki announced that it would shut down operations at its Gurgaon and Manesar plants for two days in September.

Similarly, Mahindra & Mahindra (M&M) announced previously that it would shut down its plants for 8 to 17 days in the July-September quarter.

In the April-June quarter, Maruti Suzuki, Toyota, Honda Cars India and Tata Motors had cut production by 7-18% year-on-year.

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