Slowdown forces Maruti to reduce production

TIMES NEWS NETWORK

New Delhi: Bad news continues for the auto sector. The slowdown in the car market has forced Maruti Suzuki to cut production, a senior official said on Wednesday.
Maruti, that controls around 50% of the domestic car market, said it was slowing down production at its Gurgaon factory to fall in line with the market demand. "We are not running at full capacity at Gurgaon," said Mayank Pareek, the company's executive officer in-charge of marketing. "We have made some re-adjustments in production due to the demand slowdown," he said, refusing to identify the quantum of cut.
Tight retail financing and high interest rates have dampened car sales in the country, with negative factors like inflation and stock market crash further discouraging buyers. Maruti's October sales fell 8% despite three big festivals and managed to grow only 3% in April-October 2008. The outlook remains difficult due to the low demand, Parekh said.
The company has two factories in India, the first one at Gurgaon and the new one at Manesar. Pareek said newer models —Swift hatchback, Dzire sedan and A-Star compact — are manufactured at Manesar, while others are made at Gurgaon.
Company chairman RC Bhargava said the economic downturn globally could be a dampener for car sales. "There is a great deal of unpredictability about how world economic scenario will play out. Most experts say we have not yet got to the bottom of the economic cycle," he said.
Bhargava said, "The next five months are very difficult to predict, though we do not expect sales and production this year to go below last year's figure." Maruti's stock, that have declined 48% this year, rose 0.73% to Rs 516.5 on BSE.
Maruti is not the only auto company that has cut production. Tata Motors also closed its plants to cut output in line with the slowdown.
Other companies that have reduced output include Hyundai, Mahindra and Mahindra and Ashok Leyland. Companies are asking government to facilitate cheaper and easier loans for consumers to prop up the sales.

Source: The Times of India dated 20th November, 2008