Ashok Leyland, Tata Motors to shut plants temporarily as sales slump

Ashok Leyland said in a circular to employees that it would close the Pantnagar plant in Uttarakhand, for 12 working days from 11 to 24 July, to avoid inventory build-up.

The Chennai-headquartered firm had closed its factory for about a week in June stating that it was aligning production with sales requirements.

“The volume demand in the CV sector has witnessed a drop. Hence, for optimum line utilisation and effective productivity, it has been decided to observe block closure for two days — July 13 and July 22,” said a Tata Motors notification to its employees.

Both companies said the continuing slump in demand for commercial vehicles (CVs) is prompting them to temporarily shut their factories.

Demand for commercial vehicles dropped in the second half of the previous fiscal, (2018-19) amidst a slowdown in manufacturing activity and a lull in the execution of infrastructure projects, which affected CV sales adversely.

Besides, automakers say, the new axle-load norms implemented in September 2018 led to a 15-20 per cent increase in capacity overnight, which also affected vehicle purchases.

Fleet operators are postponing purchases given the poor cargo availability and falling freight rates impacting their viability. 

A liquidity crunch in NBFCs, which have been the main source of vehicle financing, also affected vehicle purchases.

Overall CV sales in June 2019 were down 12 per cent at 70,771 units. Medium and heavy duty trucks reported a 19 per cent decline to 21,512 units. For Q1 of this fiscal, overall CV volumes fell 10 per cent at 2.08 lakh units.

The medium and heavy commercial vehicle segment bore the brunt of sluggish demand with the sales volume plunging 19 per cent at about 64,000 units.

In this segment, Ashok Leyland’s June sales fell 23 per cent at 8,123 units, while Tata Motors’ volumes were down 19 per cent at 9,358 units.