Maruti Suzuki has resumed the second shift at its plant in Gurgaon since early October, after around four months, following a pick-up in demand this festive season, people aware of the development said. The country’s largest carmaker has also hired around 500 temporary workers from the 3,000 who were retrenched during July-August this year. Following a year-long slowdown in car sales, Maruti resorted to massive production cuts since February this year as dealers were saddled with high inventory. The company started operating in single shift at plants in Gurgaon and Manesar since June to adjust production with demand and had to let go of around 3,000 temporary workers as part of the cost-cutting exercise.
“From less than 1,000 units per day in the past four to five months, the number has now increased to around 2,000 units per day at the Gurgaon facility in October,” one of the person told FE. As the company started offering the highest ever discounts this festive season, sales picked up and accordingly production was increased to meet the demand. Production was also increased to keep sufficient stock at the dealers. “To meet the incremental demand, around 500 workers were called back and the second shift was made operational since the first week of October,” one of the person said. A single shift entails a production activity for eight hours while double shifts involves production for 16 hours, in which more units are produced.
Maruti’s domestic sales grew 4.5% y-o-y in October, the first time in FY20 when the company reported positive numbers. In absolute terms too, at 141,550 units, it remains the highest since March 2019. In fact, Maruti was the only manufacturer which reported an increase in wholesales (vehicles despatched to dealers), driven by increased demand for its compact cars like Baleno, utility vehicles like Vitara Brezza and XL6 and light commercial vehicles. Maruti had sold over 45,000 units in a single day on Dhanteras, two days ahead of Diwali considered as the most auspicious day in the Hindu calendar. This accounted for around 30% of its average monthly sales and had also been the highest single-day deliveries in the past four years.
Maruti Suzuki chairman R C Bhargava earlier said sales improved month-on-month in October but a turnaround cannot be predicted. “There’s a hope that the turnaround in sales will happen in the next few months. Our sales numbers have improved but that doesn’t mean we are out of the woods yet,” Bhargava said at the company’s Q2 results press conference last month. Maruti Suzuki did not respond to the emails sent till the time of going to press. Another person, who did not wished to be named, said the similar production levels was likely to continue as now the pre-buying will start ahead of the BS-VI norms implementation from April 2020. “Customers will prefer diesel only models of Maruti which will become costlier after BS-VI roll-out,” the person said, adding there is a possibility that most of the retrenched workers will be called back.
On a year-on-year basis, the production numbers would still be lower as the company had produced more numbers last year in anticipation of a better demand. During the times when demand was robust, Maruti had been manufacturing around 5,000 units per day together at facilities in Gurgaon and Manesar. The Gurgaon plant, which has a production capacity of 7.5 lakh units per annum, manufactures vehicles such as Alto 800, WagonR, Ertiga, Vitara Brezza, Ignis and Eeco, while others are made out of Manesar and Gujarat facilities.
Analysts said retail sales for Maruti have been better than despatches since September. “We believe retail growth has been stronger and thus inventory levels have come down to below 30 days now,” analysts at Nomura said. Analysts at Axis capital wrote sequentially, retails have been improving over the past few months from 1 lakh units each in July and August and to 1.16 lakh in September. “Volumes are coming due to higher discounting and could have also got bunched up during the festive season given the significant decline in preceding few months,” they said.