Mahindra to shut plants for 8-14 days amid weak demand

With consumer demand subdued, auto manufacturers continue to cut production. Mahindra & Mahindra (M&M) will keep its plants shut for 8 to 14 days in the July-September quarter as demand remains weak and inventory at dealers remains higher than normal.

In the April-June quarter, Maruti Suzuki, Toyota, Honda Cars India and Tata Motors had cut production by 7-18% year-on-year (y-o-y). This is the second consecutive quarter in which the Mumbai-based automaker will be trimming production. The company had observed no production days across its plants for up to 13 days in the April-June quarter.

The announcement comes two days after managing director Pawan Goenka warned of job losses if demand doesn’t revive immediately. “Right now we are shutting the plants only for a few days, which does not lead to job cuts. Job losses will happen when we have to reset the line to a lower capacity,” Goenka said post the Q1FY20 results on Wednesday.

M&M said it does not envisage any adverse impact on availability of vehicles since there was adequate stock.

In the April-July period, M&M’s total domestic vehicles sales dipped 8% y-o-y to 1.62 lakh units with volumes in July alone falling 16% y-o-y. While sales of passenger vehicles declined 30% y-o-y, the sharpest monthly fall in nearly two decades, sales of commercial vehicles fell over 10% y-o-y.

Meanwhile, Tata Motors has reportedly announced a block closure for three days starting August 8, at its plants in Pune and Jamshedpur saying it is aligning production to actual demand and adjusting the number of shifts and contractual manpower. The company’s Sanand plant was shut for around seven days in June. In May, Maruti Suzuki had shut its plants in Manesar and Gurgaon for a day while in June the plant was shut for around eight days, which the company termed a maintenance shutdown. The production unit of Honda Cars India was also shut down from for three days in June.

Two-wheeler makers Hero MotoCorp, Honda Motorcycle, TVS Motor Co and Royal Enfield had alco cut production due to high inventory at the dealers. The cut in production levels started in January-February after a pile-up in stocks, post a dull festive demand. Demand for cars and two-wheelers has remained subdued since H2FY19 on account of rise in insurance premium and costlier finance, post the NBFC crisis triggered by defaults of IL&FS and DHFL. NBFCs, which used to fund nearly 60% of CVs and over 40% of passenger cars, have been strapped for liquidity.