[volkman10]

Maruti Suzuki reeling with capacity constraints decides to prioritize the newer models like Vitara Brezza and Baleno to improve margins . Further ramps up Brezza production.

Though the Swift and Dzire are still holding in demand Maruti Suzuki reduces its production to accommodate the new kids - Baleno and Brezza.

the new in-demand Vitara Brezza crossover would be favoured over legacy models in the coming months to improve the margin. Since these products are new, they command a premium and are offered without discounts. So, though the Swift twins are in demand, focusing production capacity on the more premium new models would help Maruti maximize its profit margin for the same total sales volume.

http://www.rushlane.com/maruti-vitar...-12197399.html

[rkris]

Does this include the export volumes too? I would assume that if it is exports also put together, Ford, Renault etc. should be doing better.

[volkman10]

Auto Industry's production statistics - 2016.

Ranking based on production output.



While some Auto companies are focused on the domestic markets, those have lower domestic market share run on export volumes for capacity utilization. GM, Ford , Nissan , VW lead the pack in this category.

Production utilization - Export driven.



Link

[RSR]

^ ^ ^ Why is there such a large disparity (in the total production numbers for many manufacturers) between the two tables?

[MPunditz]

Originally Posted by RSR

^ ^ ^ Why is there such a large disparity (in the total production numbers for many manufacturers) between the two tables?

The difference in the two tables is due to the differing timeline considered. While the first table shows the Production Statistics of the OEMs b/w Jan'16-Dec'16 (Calendar Year); the second table highlights the data of Production b/w Apr'16-Jan'17 (YTD Fiscal Year 2016-17).

[volkman10]

India was among the favorites of OEM's to establish their manufacturing facility basis the mentioned advantages:

-Setup cost was lower due to comparatively lower real estate value (compared to developed nations).

- Trained Manpower Availability (easy availability of technical manpower, blue collar workers, etc).

- Lower Manpower Cost (Manpower Cost / Hr remained one of the lowest across the globe).

- High Vendor Base (leading to faster & lower cost availability of parts & components).
Government Support (Leading to lower operating & setup costs). Even government run programmes such as ‘Make in India’ attracted enough attention.

-Growing Market & Vast Domestic Potential (India’s Automobile Market was one of the fastest growing markets in the world).

- India can be established as an Export Base due to central location.

Basis the advantages highlighted above; almost all major OEMs set up their massive manufacturing facilities in India backed by huge investments.



However in recent times India is slowly losing the IQ (Investment Quotient) and OEMs are vary of the already heavy investment done.
This has led to global major like General Motors to completely exit the market and even the likes of Ford are considering the cost of their presence in India.
One of the primary reasons for the lower viability of the Investment done by the OEMs is – Low Capacity Utilization.

Manufacturing facilities of Mass market OEMs in India. There are collectively 25 manufacturing plants set up by 14 Passenger Vehicle OEMs in the Indian subcontinent. Presented here is the state wise manufacturing facilities established:

Maharashtra & Tamilnadu has over 52% of the manufacturing facilities. Pune & Chennai sector has the highest density of manufacturing plants.

Gujarat has gained traction and collectively has 4 plants.



The production capacity of the passenger vehicle OEMs and the actual capacity utilization of these OEMs:

Maruti Suzuki has 3 plants and the capacity to manufacture 17 Lakh vehicles annualy. We have taken the average of vehicles manufactured in the past 11 months and compared with the Monthly Average Capacity. The Capacity Utilization of Maruti is as high as 94%.

Hyundai comes in close second with a production capacity of ~62k units per months v/s actual production of ~56k units per month and capacity utilization is as high as 90%.

However; OEMs like Tata, Mahindra, Toyota & Honda are operating at 1/3rd of the capacity!

Even Ford & RNA (Renault Nissan Alliance) operate at <50% capacity.

Newbies like MG & Kia are better off in terms of capacity utilization as well.

FCA at capacity utilization of only 8% – will be interesting to see how shall the OEM survive with such high operating costs and low volumes.



A lot of money is lost with every minute of underutilized capacity and costs billions to the respective OEMs. It is a matter of time on how these OEMs with low capacity utilization survive the tide.... The current and emerging situation post the CoronaVirus, BS6, etc. will emerge and will be far off than the presented one.

Link

[Dhiwakar92]

So if these companies accounting for the lion's share India's manufacturing sector who also happen to be some of the largest employers in the country are reeling, then just like the relief package that was announced for the daily wage laborers and poor people, how about announcing one to help our economy ?

Reduce the GST on cars as well as several other goods, bring everything to the 5% bracket.
Reduce the income tax even further so the middle class also gets a little relief, after all we're the cogs that really drive this country

Then again, since this actually might make sense, sounds reasonable and might help the country, it probably won't be passed.

[kushagra452]

Originally Posted by Dhiwakar92

Reduce the GST on cars as well as several other goods, bring everything to the 5% bracket.
Reduce the income tax even further so the middle class also gets a little relief, after all we're the cogs that really drive this country
.

I do understand the direct and indirect tax burden on the Indian middle class. However, I will try and present an another perspective.

Reducing direct and indirect taxes is neither feasible nor recommended at this point in time. For lower tax rates, India needs better tax compliance. With only a fraction of the Indian population paying taxes, the govt. usually finds itself in a bind to fund the massive social and economic development programs of the govt. (MNREGA, Ujwala etc.).

Over the course of time, as economic prosperity reaches the masses, GDP per capita will gradually increase and in turn tax collections will go up. When this happens the govt. can definitely look into reducing the rates and slabs (as mentioned by the Late Finance Minister Sh. Arun Jaitley). Moreover, as per the famous Laffer Curve, it is counterproductive beyond a point to keep increasing the tax rates. The tax collection start falling once a threshold is crossed.

Combining both these factors - the expansion of the tax base and the detrimental effect of having an exorbitantly high tax rate, I am confident of seeing lower direct and indirect tax rates in the future.

[landcruiser123]

As mentioned in the Goal(by Eliyahu Goldratt), a little excess capacity never hurt anyone. Looks like most automakers came with grand plans but sell very little. It is not the brand, it is the product and the after sales that impact the numbers. (Good products from relatively unknown brands have seen success- ex: Renault Duster in the initial years.) Clearly, MSIL and HMIL have delivered what the customer wants.

I'll not be surprised to see some factories bought out by Chinese car makers in the next decade as the fringe players start using their JV partners facilities. (Ford using Mahindra factories)

Originally Posted by volkman10

- India can be established as an Export Base due to central location.

Combined with the domestic market, it can be a good export base. But with poor domestic sales, I doubt India is attractive solely as an export base. Shipping routes are long to European and North American markets.
-EU can rely on Turkey/Eastern European countries
-N America relies on Mexico
-Australia and NZ market are closer to SE Asia
-SE Asia also has a supply of cheap labor
+The African markets are easily accessible from India, but I doubt they have a strong demand

[hs_maverick]

Any idea on what capacity utilisations would the luxury car makers would be operating in India? Since they sell in low numbers(high margin models though) would be interesting to know their numbers.

[Bibendum90949]

Originally Posted by volkman10

One of the primary reasons for the lower viability of the Investment done by the OEMs is –*Low Capacity Utilization.

Guess most or all of the plants are not operating full shifts. In the present circumstances even two shifts are superfluous. Without a 3 rd shift, one has to say they're already at 66% utilization only or even less.

When GM decided to shut one of its Indian plants, their accumulated losses had reached 6500 crores which is roughly the investment needed to set up a car factory then( 2015)

Am just quoting from a related news report in 2015 below- the chart also attached
" According to forecasts from leading consultants such as EY, PricewaterhouseCoopers (PwC), KPMG and IHS Automotive, the Indian passenger vehicle market will see 4.44-5.3 million sales annually by 2020.

At this juncture it would be interesting to see where are we standing in terms of annual sales numbers.