Both companies increased vehicle production in FY18 and in the first half of FY19 to meet robust demand in line with a pickup in economic activity
The plans of Maruti Suzuki and Hyundai are a bellwether for India’s car industry as they had a combined 68% share of the domestic passenger vehicle market
Maruti Suzuki India Ltd and Hyundai Motor India Ltd are looking to ramp up vehicle production back to the peak levels of FY18, said two people directly aware of the plans, as the country’s two largest carmakers gear up for an expected spurt in sales during the coming festival season.
Maruti plans to produce 160,000-170,000 vehicles in October, and has also asked suppliers and employees to work extra days during the month, the two people said, requesting anonymity. Hyundai, on the other hand, is likely to manufacture 58,000-60,000 vehicles as it expects demand for its Creta and Venue utility vehicles to peak during Diwali, which falls in November, they added.
The plans of Maruti Suzuki and Hyundai are a bellwether for India’s car industry as they had a combined 68% share of the domestic passenger vehicle market in the fiscal year ended 31 March 2020.
Both companies increased vehicle production in FY18 and in the first half of FY19 to meet robust demand in line with a pickup in economic activity. Sales later decelerated due to factors such as a slowing economy, higher fuel prices, insurance costs and farm distress.
This year, too, automakers remain cautious about the sustainability of demand despite an expected spike in festive sales. Maruti Suzuki, for instance, has declined to share sales volume guidance for this fiscal.
Automakers have also been finding it tough to ramp up production due to disruption in supply chains. Lockdowns in various states, rising number of coronavirus cases, shortage of skilled manpower and increased inspection of imported parts from China following escalating tensions between the two nations have added to the woes of automakers and their suppliers.
Mint on 18 June reported that Osamu Suzuki, chairman of parent Suzuki Motor Corp., had written to Maruti’s suppliers, urging them to help the company in this regard by producing more components.
Both Maruti Suzuki and Hyundai managed to ramp up production in the past two months as retail demand picked up due to faster recovery in the rural markets and a shift in customer preference for personal mobility.
Maruti’s domestic wholesales, or factory dispatches, touched the 100,000 mark in July, up from 51,274 vehicles in June and 13,865 units in May. Hyundai recorded sales of 38,200 vehicles in July, rising from 21,320 units in June and just 5,500 units in May.
Both companies though plan to reduce manufacturing after the festive season since the long-term demand scenario is still uncertain due to the rising tally of coronavirus cases, said the first person cited above.
“Both companies are known for sticking to their production forecast," the person added.
A spokesperson for Maruti Suzuki declined to comment on the production forecast. Hyundai did not respond to an emailed query sent on Monday.
Ever since the easing of the lockdown, Maruti’s vehicle production has been trailing retail sales as demand for its small cars picked up in rural and semi-urban markets.
In the fiscal first quarter, Maruti’s retails stood at 119,000 vehicles against wholesales of 67,027 units in the domestic market. Dealers, as a result, are left with stocks of less than 30 days.
“As of now, we are not limited by demand but by supply. We have suppliers in 46 districts in nine states and local lockdowns are impacting their operation. We are running the Gujarat plant with one shift due to rising covid-19 cases and plan to start the second shift from August, which will help us add another 900 cars per day," said Rahul Bharti, vice-president, corporate planning and government affairs, in a post-earnings conference call with analysts on 29 July.
The second person cited above said Maruti has been quite bullish about the festive season as retail sales are picking up and the production forecast of 170,000 vehicles can be achieved due to the ramp-up at the Gujarat plant, where popular models such as Swift and Baleno are made.
“Production in Gujarat plant could not be ramped up because of the curfew at night, and labour issues. Also, the management expects demand to sustain till the festive season in the rural markets and some uptick in urban demand has also been witnessed. Production though will be reduced after Diwali," the person said.
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