Maruti Suzuki's production declined 20% year-on-year (y-o-y) in October, the ninth consecutive month in which the company trimmed output to bring down the high inventory with the dealers. Despatches to dealers, however, improved and rose 4.5% y-o-y in October as retails picked up during the festival period, after 11 months of subdued demand.
In a stock exchange notice on Friday, the country's largest car maker said it produced 119,337 units in October against 150,497 units in the year-ago month. The production cut was the sharpest — 38% y-o-y — in the mini segment, comprising cars like Alto and old WagonR, with the company rolling out 20,985 units in October. Production of sedan Ciaz was down by 45% y-o-y. Utility vehicles (UVs) output, however rose 1% y-o-y at 22,736 units while models like the Baleno and Swift saw a production cut of 13% y-o-y.
Maruti had been cutting production since February as dealers were saddled with inventory ranging from 45-60 days after Diwali last year, when car sales lagged expectations, while most manufacturers continued to push stock to the dealers.
The company's chairman RC Bhargava had earlier said production will follow the market demand, and employment is related to the production volumes. "Production is never steady in many industries and it depends on how the market behaves," Bhargava had told FE.
Maruti's passenger vehicle despatches improved in October, first time in the last seven months when the company reported positive numbers, as discounts had hit record high and retail demand picked up as majority of the festivals fell in October including Dhanteras, which accounts for over half of the festive season sales. Other manufacturers, however, reported over 20% y-o-y decline in despatches in October on account of inventory correction, but claimed retails were much better. Car sales have been subdued for the past year, owing to rise in vehicle prices on account of higher insurance costs and safety norms.
Following pick up in retails, the company's inventory is understood to have come down to normal 30 day levels. FE had reported on Tuesday that the company resumed the second shift at its plant in Gurgaon and production is likely to be steady in the coming months.
Shashank Srivastava, executive director, sales & marketing at Maruti Suzuki earlier said retails were positive during Navratras compared with same period last year.
"Sequentially, there has been a good growth, and that is also reflected in our inquiry growth especially for petrol models and also the bookings," Srivastava told analysts post the Q2 results last month.