After resorting to production cuts to align output to weakened consumer demand, Maruti Suzuki India on Wednesday said it will shut down operations at its Gurgaon and Manesar plants for two days — September 7 and 9. This is the first time Maruti has officially announced shutdown of operations at its two plants apart from the regular annual maintenance shutdown twice a year — in December and June.
Separately, Tata Motors said it’ll continue its block closure at its Pune passenger vehicle plant in September first week to clear inventory. Block closure is different from a plant shutdown. Here, one or more assembly line is closed rather than a complete production shutdown.
Tata Motors had done block closure at its passenger car and commercial vehicle plant from August 28 to 31. While the block closure at the commercial vehicle plant was lifted from September 1, the closure at passenger car plant will continue till the first week of the current month.
Analysts said the companies have no choice but to go for shut down of operations or block closure and more such developments cannot be ruled out in future.
Retail sales continue to move in the slow lane leaving the dealers saddled with high inventory. This has reduced their ability to take further despatches from the manufacturers. In such a scenario the manufacturers have no option but to go for production cuts and plant shutdowns.
The shutdown of Maruti’s plants comes after the company’s domestic sales (despatches to dealers) plummeted 36% year-on-year in August, which was the tenth consecutive month of such decline. This was after the company had cut production by 34% y-o-y during the month – its seventh consecutive month of trimming output and the third time its despatches were less than a lakh units to its dealers since July 2017. Usually automakers shut down their plants twice in a year for maintenance purposes. However, most manufacturers including Maruti, Tata Motors and Mahindra & Mahindra had shut down plants in the last six months for anywhere between two to ten days.
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While Maruti Suzuki had shutdown its plants for one day in May, apart from annual maintenance shutdown for seven days in June, people aware of the development said the company has been operating just one shift at all its plants to curtail output.
The Manesar and Gurgaon plants have an annual capacity of 7.5 lakh units, and models like Swift, Dzire, Baleno, WagonR and Vitara Brezza are manufactured there. The company’s sales of mini cars comprising Alto and WagonR tanked 71% y-o-y in August while compact segment, including Swift, Baleno and Dzire, fell 24% y-o-y. Mid-sized sedan Ciaz sold 1,596 units as compared to 7,002 units a year earlier.
Due to lower production, the company had to let go of 3,000 temporary workers in the last two months. Maruti Suzuki chairman RC Bhargava 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.
To align wholesales with retails, all car manufacturers have been temporarily halting production and laying off workers. Mahindra & Mahindra had shut production across plants for up to 13 days in the April-June quarter and recently said it would shut production for 8-14 days in the July-September quarter. Others including Tata Motors, Honda Cars India and Renault-Nissan alliance have shut down their plants for anywhere between four and ten days in May-June. Toyota and Hyundai India had recently decided to halt production at plants for two days to combat slumping sales. As per Siam estimates, manufacturers had to lay off 15,000 temporary workers since April 2019.
Barring October last year, when sales went up 1.55%, passenger vehicle offtake has been in the negative zone in 13 of the last 14 months. The industry has sought immediate steps from the government, including reduction in GST rates and initiation of scrappage policy to boost demand.
