Maruti trims production by nearly 18% in Sept, eighth consecutive month of cuts

Analysts said there was a minor inventory correction in September but added that higher discounts had helped build sales momentum.

By:Published: October 9, 2019 7:00 AM

With consumer sales failing to pick up, Maruti Suzuki has said it cut production by nearly 18% year-on-year (y-o-y) in September. This was the eighth consecutive month in which the country’s biggest car maker trimmed output to match wholesale despatches with retail demand.

Despatches to dealers fell by 27% y-o-y the 11th consecutive month of a decline. Production cuts were the sharpest — 38% y-o-y — in the mini segment, comprising cars like the Alto and the old WagonR, with the company rolling out just 23,073 units. They were somewhat sharper for the Ciaz at 50% y-o-y. Popular models like the Baleno and the Swift were a tad less impacted, with production pruned by about 4% y-o-y and the output of utility vehicles (UVs) dipped by a little over 17% y-o-y.

Analysts said there was a minor inventory correction in September but added that higher discounts had helped build sales momentum. “The first half of the month was very slow due to market expectations of a GST cut. Floods in some regions also affected wholesales,” analysts at Nomura said.

Maruti Suzuki chairman RC Bhargava had earlier said production would track demand and that employment of temporary workers would be related to the production volumes. “Production is never steady in many industries and it depends on how the market behaves,” Bhargava had told FE.

The company produced a total of 132,199 units last month. This was nonetheless higher than the 111,370 units in August, a fall of 36% y-o-y and the worst ever monthly decline.

Maruti has been cutting production since February as dealers were saddled with inventory ranging from 45-60 days after Diwali last year. While manufacturers continued to despatch stocks to dealers in the hope demand would see an uptick, car sales lagged expectations.

Despatches of passenger vehicle fell 29% y-o-y in September, the sharpest monthly fall in two decades, as the top five car makers reported a double digit decline. This was the 11th consecutive month of decline in volumes and experts attributed it to the rise in vehicle prices on account of higher insurance costs and safety norms.

While Maruti Suzuki has been putting out official production data since January, production cuts of nearly 30,000 units are understood to have taken place in December 2018 too, as stocks had piled up after a subdued festive season.

Several other manufacturers of passenger vehicles, two-wheelers and commercial vehicles too have been resorting to production cuts in the past seven to eight months to clear unsold inventory.

Mahindra & Mahindra had shut production across plants for up to 13 days in the April-June quarter and 8-14 days in July-September. Ashok Leyland last week announced it will suspend manufacturing at its various plants for up to 15 days this month, the fourth time in the last three months when the Chennai-based automaker will be shutting plants.

Others, including Tata Motors, Honda Cars India and Renault-Nissan alliance have shut down their plants for anywhere between four and 10 days in May-June. The companies have been trimming output since January this year.

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