Chennai: Avia Ashok Leyland Motors, a subsidiary of truck maker Ashok Leyland Ltd, has said it will stop the production of trucks at its Prague unit citing the global economic slowdown.

The company, in a statement said it will cease production from the end of this month at its Letnany plant.

“Future products would be made available from other manufacturing sites of Ashok Leyland as and when the economic situation improves," said the company.

“It is a prudent decision as European demand continues to remain weak, and they will look to get rid of the inventory. This move shows that they don’t see a recovery in the near term and the pain is expected to continue," says Yaresh Kothari, an analyst at Angel Broking Ltd. Kothari adds that shutting down operations will help the company have a better control over costs.

The global medium-heavy truck market will continue facing strong headwinds, as Western Europe experiences considerable decline in new truck sales and volatile energy prices, keeping consumers in many parts of the world from buying new equipment, according to a Frost and Sullivan report in February this year.

In the domestic market, medium and heavy commercial vehicle sales saw a steep fall of 23% to 2.6 million units last fiscal, the sharpest decline since 2008-09, when the drop was 37%, according to the Society of Indian Automobile Manufacturers.

Ashok Leyland is expected to launch the Avia range of trucks in India this month. These will be rolled out of the company’s Pant Nagar facility in Uttarakhand.

Kothari says this move will not impact the India launch since the trucks are being made in the country.

In 2006, Ashok Leyland bought Avia Truck Business unit at an estimated cost of $35 million to help expand into global markets and improve its product portfolio. The company was later renamed Avia Ashok Leyland Motors and it has been producing trucks in the total weight class of 7.5 to 12 tonnes.

In 2012, Avia produced 1,003 trucks for markets in Europe, the US, and Asia, compared with 600 units in 2011, a growth of 67%. The company posted revenue of 665 million Czech Koruna, which was a 56% growth over last year. “This would not be retail sales but volumes dispatched to dealers, which is why the numbers seem high," says Kothari.

Avia and Ashok Leyland will continue to provide aftermarket support for warranty and spare parts to all its customers.

Ashok Leyland could not be reached for comment.

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