Maruti Suzuki to cut diesel car production


The country's largest car maker and industry bellwether Maruti Suzuki is facing the heat from the sales slowdown, which the Indian car industry has been experiencing for many months now. Maruti Suzuki's marketshare for May 2013, in terms of dispatch sales, fell to 40% from a consistent 44-45%, the surest indication that all's not well at the nation's top car maker.  According to IBNLive, inventory build up has led to Maruti Suzuki deciding to shut production of diesel cars for one day at its Gurgaon and Manesar factories. This shutdown will focus on cutting production of diesel engined cars, in what is a first for Maruti Suzuki, a car maker that has enjoyed robust demand for its diesel cars all along.

Combined, both factories build 5,000 cars a day with many top selling diesel cars such as the Swift hatchback, Dzire compact sedan and the Ertiga MPV being produced at these factories. So, tomorrow's production cut at these factories will give Maruti Suzuki some breathing space in terms of inventory build up. Over the past few months, Maruti has also been cutting back on petrol car production as petrol car sales bottomed out a while ago when car buyers shifted towards the cheaper, diesel fuel. Now though, diesel car sales have also been slowing down as the Indian government implements the diesel deregulation through periodic hikes in diesel prices. 

To boost diesel car sales, Maruti has been offering discounts and quick delivery of many diesel car models. Apart from the one day production cut at Gurgaon and Manesar tomorrow, Maruti Suzuki will also embark upon its annual maintenance shutdown, which is on schedule, from June 17th to 22nd. This shutdown will further allow Maruti Suzuki to align inventory levels to market demand. Notably, Maruti Suzuki, in the past, had announced that it would regularly resort to factory shutdowns for one or two days every month to ensure that it doesn't over produce cars, especially at a time when supply outstrips demand. 

Maruti Suzuki isn't the only car maker caught in the throes of the sales slowdown in India. Tata Motors, Mahindra, Toyota and many other car makers in India are going through a lean patch, reflecting the overall buyer sentiment in the country. The Reserve Bank of India, which controls the rates at which banks borrow and lend, hasn't cut interest rates significantly, citing inflationary pressures. This has meant that car financing isn't getting any cheaper, forming another jolt to the car industry. Also, the excise duty hike on cars classified as "SUVs" is a blow that the Indian car industry has had to contend with.

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