Automotive companies in the country are facing a severe lack of demand for passenger vehicles. The low demand and sales of passenger vehicles in the country, has led to thousands of products left unsold in company inventory.
One of the major reasons for the low sales and demand is the slowing job growth, rise in fuel prices and a liquidity crisis among financial companies. This has led to a halt in production from many major automotive brands in the country for long periods.
Major automotive brands such as Maruti Suzuki, Mahindra and Tata Motors have announced a halt in production to allow the sale of their cars in the inventory. These companies have announced plant shutdowns in the month of June, with few of them yet to announce the same in the coming months.
According to reports from Economic Times, the automotive industry in the Indian market is facing a severe lack of demand for passenger vehicles. The low demand has been present for over the past seven months, leading to an increase in inventory at company dealerships. According to reports, company dealerships now have inventory worth $5 billion (Rs 35,000 crore) of unsold cars.
ET also reports that the shutdown of production from auto companies will reduce the industry output by around 20 percent during May-June 2019. This should help decrease the pressure on the company inventory. This will also be a major relief for dealerships which are the worst-hit. This is because company dealerships have to pay GST on the unsold vehicles in their stockyard as well.
While companies such as Maruti Suzuki, Mahindra and Tata Motors have already shutdown production in May for several days. Other companies such as Honda, Renault-Nissan and Skoda Auto has plans to shut down production for almost 10 days.
Thoughts On The Halt In Production From Auto Brands
Sales of passenger vehicles in the country has been witnessing a consistent drop over the past several months. The trend is likely to continue in the near future as well. However, it is not only the car sales which have been affected, many two-wheeler companies have also registered a slowdown in demand.