Economy in crisis: Passenger vehicles worth 52K cr lying unsold; Maruti, Tata, Honda, Mahindra stop production

In what is seen as a sign of a sinking economy, major two and four-wheeler automakers such as Maruti, Tata, Honda, Mahindra in India have shut down their production due to unsold stock.

As per the latest data, at the start of June 2019, there are around half a million passenger vehicles worth $5 billion (₹35,000 crores) lying unsold in company dealerships.

Similarly, in the two-wheeler segment, the unsold stock stands at 3 million units valued at $2.5 billion (₹17,000 crores).

In total, as per an estimate, passenger vehicles worth ₹52 thousand crore are lying about unsold, signaling ‘bure din’ (bad days) for the Indian economy.

Experts believe that liquidity crunch, slow job growth and weak buyer sentiment have led to the crisis.

The demand for passenger vehicles over the past seven months has gone down drastically, claimed a journalist who has been the covering automobile sector for many years.

“In the last ten years, we have not seen anything like this when all the segments are down. The start of the new financial year has not turned out to be very good for the industry,” Indian Automobile Manufacturers (SIAM) Deputy Director General Sugato Sen was quoted as saying by the media.

According to news reports, Maruti Suzuki announced a second round of shutdown from June 23-30 while Mahindra stated that its manufacturing unit, Mahindra Vehicle Manufacturers will have no production days for 5-13 days in the first quarter of 2019-20.

Similarly, Tata Motors’ Sanand plant which is located in PM Modi’s home state Gujarat, was shut from May 27 to June 3 while the production unit of Honda Cars India was shut from June 5-8.

Renault Nissan and Skoda Auto also plan another round of closure for 4-10 days in the month of June 2019 for “scheduled maintenance” claimed some reports.

However, the real cause for the shutting down is the piling up of unsold vehicles.

“Maruti Suzuki, the country’s largest automaker has the capacity to manufacture 15.5 lakh units at its two facilities in Gurgaon and Manesar. The company is dealing with inventory of around 50,000 vehicles as compared to an average of 25,000-30,000 cars,” claimed a news report.

The Congress leader Randeep Surjewala raised this question and called it ‘a pang of plunging economy’ in his tweet:

Former Chief Economic Adviser to Modi government, Arvind Subramanian on Tuesday claimed that the Modi government has painted a far rosier picture of economic growth than the more modest reality.

As per Subramanian, the Modi government has claimed that Indian economy grew at about 7% between 2011-2017, however the real growth rate was about 4.5%.