Auto index falls on sales worries; Tata Motors down 1.4%

Signalling slowing demand in the country, many auto majors have started announcing plant closures and ’no production day’ to combat inventory pile-ups. And the slowdown is now reflecting on the auto index too.

Tata Motors, down 1.38 percent, is dragging the auto index lower today after the company said that it would halt production at its Jamshedpur plant for three days citing a slowdown in demand due to deceleration in economic growth. Tata Motors had earlier this month stopped production of commercial vehicles at Pune for three days.

Auto shares have also witnessed profit taking on concerns that sales growth in June is likely to remain subdued.

Meanwhile, other auto majors like Bosch and General Motors India are also temporarily shutting manufacturing plants or are announcing no production days. Bosch has announced that with a view to adjust production to meet the demand for products and to avoid unnecessary buildup of inventory, it has proposed to suspend the manufacturing operations at the company’s Jaipur Plant from June 28, 2012 to June 30, 2012 and at the company’s Bangalore Plant from June 29, 2012 to June 30, 2012.

General Motors president and MD Lowell Paddock told Firstpost on Wednesday that the plans to develop a car between the mini car Chevy Spark and the Beat hatchback have been put on the backburner, while the company has not set a time line for for the Light Commercial Vehicle launch right now since the market for commercial vehicles wasn’t very promising. Sluggish market conditions have also ensured that GM’s two plants - at Talegaon and at Hallol - observed some no-production days to align supplies with demand.

Fiat India is considering shutting down its plant for a few days next month as its petrol models are not selling well and it is monitoring the inventory situation currently. Fiat India’s car production in last month went down by 57.13 per cent to 1,041 units, SIAM had said.

Toyota Kirloskar Motor too has rationalised production of its petrol cars due to low demand. According to Society of Indian Automobile Manufacturers (SIAM) data, Toyota had rolled out over two-fold more passenger cars in May that stood at 8,511 units.

Maruti Suzuki had stopped production of petrol models, like the Alto, M800, A-Star, Estilo and Omni for three days to prevent inventories piling up.

With inputs from PTI