There’s a reason why automobile firms are unsure of starting operations from April 20 despite the government allowing them to do so. The total inventory of passenger vehicles currently stands at around 2.6-3 lakh units, which is a tad higher than average monthly sales the segment was clocking before the lockdown at around 2.2-2.4 lakh. For all the PV players like Maruti Suzuki India, Hyundai Motor India, Tata Motors, Mahindra and Mahindra, and Honda Cars, the current inventory is far higher than their monthly sales during March.
For instance, Maruti’s inventory – including its stockyards and dealer networks – stands at around 130,000 units whereas its domestic sales during March was 78,344 units. Similarly, Hyundai’s inventory stands at 35,000 against March sales of 26,300. In the case of Tata Motors, the inventory is around 20,000 against March sales of 5,714. For Mahindra and Mahindra, the inventory is around 15,000 while March sales stood at 3,383 units. In the case of Honda Cars, the inventory stands at 8,000 units while March sales were at 3,697 units.
“We started the transition to BS VI from April 2019. We stopped the production of BS IV from January 2020. So, there is no stock of BS IV. As regards network stock, we have close to 130,000 cars. We were prepared much in advance and were bringing out one model every month of BS VI-compliant cars,” a Maruti Suzuki India spokesperson said. According to a Hyundai Motor India spokesperson, “We have stopped making BS IV cars many months ago and are making only BS VI cars. We do not have any inventory of BS IV cars in the plant at all. As for BS VI cars, we are still in the process of stocktaking.”
According to Rajesh Goel, Senior Vice-President and Director (marketing and sales), Honda Cars India, “Considering the challenges of last year, in September 2019, we had taken a very tough and painful decision of cutting down our annual production by 40%. The decision however difficult, proved to be timely and as a result we do not have any BS IV stock. Amidst the model-wise sequential transition to BS VI which was underway, our factory inventory was less than two days at about 700 units when lockdown was announced.”
Industry executives, therefore feel that if dealer network and retail showrooms are not allowed to operate then producing vehicles would not be of any meaning. As Maruti Suzuki India chairman RC Bhargava says, “Produce for whom?” There’s an added uncertainty of producing more without being able to sell and therefore adding to inventory because after the lockdown sales are expected to be tepid because of falling income due to salary cuts and layoffs. However, some executives feel that demand for small cars may increase because people may avoid public transportation.
Another problem which is acting as a hindrance for auto companies to start production is with regard to their vendors. Every firm needs to first assess where its vendors are located and whether they can operate within the conditions stipulated by the government. If the vendors or their employees are in red zones (hotspots) then functioning would be a problem.
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