Maruti Suzuki In Deep Trouble: Production Cut For 4-Months In Row, Output Down By 18%; What Is The Reason?

Why has Maruti cut down on production? (Pic dated 2012)
Why has Maruti cut down on production? (Pic dated 2012)

Vehicle purchases have slowed down gigantically and we had initially covered on 26th April, how the shift of demand towards cab aggregators, Uber and Ola have drastically led to reduction in sales of automobile industries.

We can now present an actual impact of this, as India’s largest car manufacturer Maruti Suzuki India has cut vehicle production by over 18% in May, adding it to the count of 4th consecutive month of cut in the production cost. In April month, it slashed a 10% decline in automobile production.

The Core Reason behind MSI’s Plummet

Car sales as compared to the preference of reliance on app-based cab services like Ola and Uber (majorly) have more than halved in the past two years. Due to problems such as traffic congestion, rising commute times and hassle in parking, people have started to show a unanimous preference towards public transport and ubiquity of cab-hailing and ride-pooling options, resulting in people preventing to opt for buying cars, mainly in metro cities.

Where high fuel prices, low availability of funds and escalating acquisition costs have led to disinterest in most rural places, urban customers are finding more convenience in shared mobility, which is increasingly replacing new car ownership in the country’s key Tier 1 cities.

The generation today believes that time is money. With growing traffic problems and awareness of increasing pollution leading to environmental hazards, millennial prefers sharing cabs and cycles, for traversing. Even the Diwali sales have done no good for car manufacturing companies.

The Catastrophic Downfall of Maruti Suzuki’s Production

Complying with the deflation of car sales, automobile companies have witnessed quite a loss, leading to cutting down their car production.

  • MSI has cut over 18% vehicle production in May. It reduced the production in February and March too.
  • It produced a total of 151,188 units in May, including Super Carry LCV, down by 18.1%, i.e. 1,47,669 units in April.
  • The production of passenger vehicles, including Alto, Swift and Dzire is also cut by 10.3% to 1,44,702 units, compared to 1,61,370 units in April 2018.
  • The production of mini segment vehicles has been slashed by 42.29% and has come down to 23,874 units from 41,373 units.
  • Segment cars have come down by 9.54% to 84,705 units in May, from 93,641 units in May 2018.
  • Even the utility vehicles have shown a decline of 3.21% falling to 24,748 units, from 25,571 units in May 2018.
  • The production of vans has declined by 34.99%, falling to 10,934 units from 16,819 units.
  • In order to compensate the demand of vehicles, MSI had cut the factory production by 10% in April.

Not just this, even the auto manufacturers have found a reduction in their sales. Overall passenger vehicle sales in India dropped over 17% in April, the worst monthly fall in nearly eight years.

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