VW & Tata Motors temporarily slam brakes on Car Production. EDIT : Others follow suit

[GTO]

It has been reported earlier that inventory levels at manufacturer & dealer levels are at an all-time high. Back of the envelope calculations estimate currently unsold inventory at over 150,000 cars (all manufacturers) from the month of May. This is indeed an all-time high.

Indian Express reports that VW & Tata Motors are planning a temporary block on production, primarily to clear up unsold inventory. It's obvious that production has exceeded demand over the last 3 months. Usually, manufacturer reps will try to stuff inventory down to the dealer. However, when dealer inventories pile up, they'll refuse to entertain any new cars from the manufacturer.

Inventory costs are a significant drain on finances and result in huge interest payments to the banks (who finance the inventory held at any point of time).

While Tata Motors has confirmed a three-day block closure, Volkswagen workers’ union claims that the company is planning a month-long block closure soon.

Source & Full Article

Indian Express

Related Thread

Govt's apathy toward the Indian Car Industry (Why this Kolaveri for the Indian Car Industry?!!)

[shankar.balan]

Good time to buy a car then! Can push hard for discounts which in turn will help the consumer pricing payouts and the manufacturer to clear inventory!

[volkman10]

Originally Posted by shankar.balan

Good time to buy a car then! Can push hard for discounts which in turn will help the consumer pricing payouts and the manufacturer to clear inventory!

Discounts for petrol cars is possible, but ruled out for diesels at least as seen from VW.

Cheers!

[shivasuma]

Maybe VW should use this opportunity to assemble more Jettas. I had booked my car in mid-april and have been promised deliver in mid-august. Thats a 4 month waiting period. I should ask for the interest on the booking amount that I have paid and then maybe I might get my car earlier than promised.

[revintup]

When i was out hunting for a sedan, vento was promised within a week but of course no discount. As usual these sales people hide the fact that the car is not selling and the guy was like " Sir, you are lucky that we have one car in the same spec and colour at our yard due to cancellation by Mr X." Of course this 'Mr X' has cancelled so many more cars.

[aniketi]

But VW and TAMO has that much huge inventory for diesel vehicles as well? I am surprised. That means diesel Vento & Polo are also not in demand? Also i am surprised to hear that diesel Manza & Indicas has so much inventory that production has to be stopped. I thought after recent petrol hikes and governments plans to add more tax (one time) on diesel vehicles, there should be surge in the diesel cars demand. But looks like its not true.

I guess its more to do with recession and rainy season around. People are feared to global recession, so mass public is under tension to loose there jobs. Businessmen are worried about their business. Also government needs to lower the interest rates soon. Else next 3-6 months will be horrible for auto Industry.

PS: As far as Pune is concerned, i see lot of new cars on the roads. Property prices are all time high. Looks like Pune has less impact

[diffsoft]

VW's finances may also have gone awry after the Maha Govt changed it's mind to refund VAT only on vehicles sold in the state vs. everywhere earlier (Volkswagen India, Bajaj Auto and Mahindra upset with changed rules for VAT set off in Maharashtra | Rush Lane)

Cheers,

[samarjitdhar]

Originally Posted by aniketi

Also government needs to lower the interest rates soon. Else next 3-6 months will be horrible for auto Industry.

With the official CPI climbing to 10.36%, unofficial one probably even higher? I think not. I don't think the nation is suffering from a liquidity crunch, more of a lack of overall demand and growth prospects in the world economy. Sorry about going OT here.

On a different note, I wonder if VW will ever get rid of their 2011 inventory of their petrol Ventos. I heard that they launched the Vento in China. Maybe they can ship those to China?

[Swanand Inamdar]

This was ineviatble. What with the sky rocketing fuel prices (petrol) and grapevine on increasing taxes for vehicles (diesels). Add to that, pathetic policies the govt. introduced to literally curb the automotive sector.

Question is, how much more would the common man be affected due to this closure?
Those buying on loans may have to cough up more interest, while dealers would just enjoy the intererst on already paid amounts, while the companies manufacture the car.

EDIT: Would there be a stop in bookings too? Or would dealers still continue to take bookings? Obviously, taking into consideration the current inventory.

[DieselDon]

I was bitten by the Diesel Tax Bug a week ago and was scouting for my next ride.

In Hyderabad
-Manza is available off the shelf (as is always)
-So is the Vento(D) !
-Rapid(D) is 1 day to 2 weeks (as per Showroom depending on the colour)

Definitely a supply > demand scenario. However am surprised on the move by VW/Tata.

I would have expected to see 'Offers'. But a cutback in production ?
Tata might want to rejuggle and indulge in the Special Editions (as usual).
Whatz cooking with VW ? Increase the Snob value by creating a 'waiting period'.

(OR) Is the Diesel Tax bug for real and in the near future ? Are VW/Tata gearing up for the shortage of demand that would result.

Cheers,

[neosmart]

All signals pointing towards a revisit of 2008. Btw I don't think discounts will be in offerring as yet. That would depend upon who is holding up the inventory. Manufacturer or dealers
So after action of stopping production, discount might take a while, provided nventory situation doesn't mprove itself.

[RacingForIndia]

I wonder if there are manufacturers who have already stopped production, but not reported it.
Ford, Fiat, Renault, Nissan may be hit by the low sales as their usual numbers are already very low.

[souravc]

This is the real economy freezing up - Indians are getting pinched and have {sensibly} started looking at the bigger picture and away from the "diesel running cost lower" / "petrol carsbeing offered at mind boggling discounts" / "second hand petrols at throwaway prices" discussions and have started having a hard look at the EMI outgoes and (un)certainty of the expected hike and bonuses !!
As Samarjit mentioned , with CPI stubbornly at above 10 % ( real value likely to be much higher) and growth coming to a grinding halt its grim !
I feel very sad at the policy inaction , the scenario would really hurt the common man

[F150]

Originally Posted by GTO

It has been reported earlier that inventory levels at manufacturer & dealer levels are at an all-time high. Back of the envelope calculations estimate currently unsold inventory at over 150,000 cars (all manufacturers) from the month of May. This is indeed an all-time high.

Originally Posted by Swanand Inamdar

Question is, how much more would the common man be affected due to this closure?
Those buying on loans may have to cough up more interest, while dealers would just enjoy the intererst on already paid amounts, while the companies manufacture the car.

Didnt understand your question. How interest rates and production closure are related ?

EDIT: Would there be a stop in bookings too? Or would dealers still continue to take bookings? Obviously, taking into consideration the current inventory.

Why would they stop taking bookings ? They would love get rid off the existing stock.

Though the current conditions are not so so conducive for the automotive industry, like GTO said in the other thread, there is always a silver lining. Best time to grab enthusiast cars [Laura Tsi, Linea Tjet etc] with huge discounts.

[libranof1987]

Is it going to be just VW or Skoda too that will face the shut-down?

It is written that this trend is expected to continue till December; isn't that extremely far away considering how quickly things change (for the better or worse)?

They will definitely save money by reducing work-days/hours but there's a significant downside to this whole decision - old stock.

If they reduce/stop production, customers booking a car now or say a few months from now will get a vehicle manufactured quite some time back. I'm not sure if this will go down well with customers.