Output cut signs flash on auto avenue

Dec 19 2012, 01:06 IST
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SummaryAs inventories touch 6 weeks, companies are dishing out discounts to push sales.

earnings was expected, but would still be limited due to heavy discounts and inventory levels.

Among passenger vehicles, inventories for many petrol cars and some diesel vehicles have touched 4-6 weeks, with Tata Motors, Hyundai, Volkswagen, Ford, GM and Fiat facing the heat. GM has already reduced output through 'no-production days'. Others may be forced to follow suit.

Maruti Suzuki and Mahindra & Mahindra have seen relative success both on new launches and the popularity of select diesel models. Maruti saw strong demand for the new Alto 800 and diesel models of the Swift, Dzire and Ertiga, while Mahindra's charge was led by the XUV500 and Quanto.

Hyundai Motor India (HMIL) claimed its stocks were in control, as production had already been reduced as per demand. While even diesel models are now on discount, the silver lining is that demand for petrol cars like the Eon is up. Stocks are at three weeks, which is well below the normal levels of a month's inventory, said Rakesh Srivastava, HMIL's vice president for marketing and sales.

A businessman with both car and two-wheeler dealerships said, The slowdown is a concern across the industry. Most car and two-wheeler dealerships have inventories of 4-6 weeks, which about eight months back stood at around two weeks. This points towards a new trend where high inventory levels have become the norm across the industry, especially compared with last year's.

In two-wheelers as well, Hero MotoCorp is likely headed towards another high stocks situation (like August-September this year). This may force the market leader to again lower production in Q4, FY13. Meanwhile, Bajaj Auto has reportedly already cut output to match the lower demand.

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