Source: The Economic Times, Nov 12, 2019
MUMBAI: Automakers and their vendors have slashed or deferred nearly $3 billion of expansion plans for the current financial year as a deepening slowdown in the industry shows no signs of improving. Despite retail sales growing for the second consecutive month in October and a pickup in wholesale numbers month-onmonth, auto makers are apprehensive about prospects for the remaining five months of FY20.
Maruti’s parent Suzuki Motor Corporation has deferred its $550-million third plant in Gujarat while Honda Motorcycle and Scooter India has pushed back plans to commence production from its third manufacturing line in Gujarat. Suzuki Motorcycle India has also put off by a few years its proposal to set up a second plant.
Tata Motors and Ashok Leyland, the country’s top manufacturers of commercial vehicles, have scaled back capex plans for FY20 by Rs 500 crore each. Mahindra & Mahindra has cut investment plans by Rs 250-300 crore so far in FY20.
‘Focus on ensuring ecosystem viability’
Vehicle makers alone have put off a cumulative $1-1.5 billion of investments. A similar quantum of deferrals is expected by the vendors.
“Having recognised the slowdown is now definitely upon us, the focus has been on ensuring that we manage the slump by doing it right,” said PB Balaji, group CFO, Tata Motors. “The focus has been on ecosystem viability, not just our viability,” he added. Official data released on Monday showed the Index of Industrial Production shrank 4.3% in September, after a 1.1% contraction in August. Mahindra & Mahindra MD Pawan Goenka had said in August that there could a 15-20% deferral of the company’s Rs 12,000-crore, threeyear capex plan. He had, however, added that product-related investments would continue.
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