Tata Motors to take third plant closure

The Jamshedpur unit of Tata Motors will go for a third closure this month from today as the slowdown in the automotive sector shows no signs of abating.

Tata Motors earlier went for a day closure on August 1, followed by three block closure from August 8-10. Though the closure from August 16 will reportedly be for two days, it may last for four days.

As per a latest report by India Ratings & Research, over April-June 2019, the auto industry undertook a production cut of 11% year on year (yoy), including around 12% yoy, 14% yoy and 10% yoy production cut in passenger vehicle, commercial vehicle and two-wheeler segments, respectively, to bring down dealer inventory to 21 days by September 2019.

Tata Motors, which had previously flagged challenges facing the industry, said it closed some blocks at its Pune plant. The company had last month reported almost doubling of its consolidated net loss for the first quarter at Rs 3,679.66 crore. Guenter Butschek, CEO and MD, Tata Motors in a statement said "The continued slowdown across the auto industry due to weak consumer sentiments, liquidity stress and the impact of axle load effect, particularly in medium/heavy duty, impacted overall demand. Over the past few years, we had struck a good balance between managing market dynamics and financial health. However, this time, despite our continuous turnaround effort we could not prevent some impact on our Q1 performance." Guenter said.

The Indian auto industry is going through a slowdown for a year now. According to the executives across the OEMs, retailers, component makers, one of the primary reasons for the slowdown in the industry has been tightening of liquidity by non-banking financial institutions following the emergence of crisis at Infrastructure Leasing & Financial Services Ltd. The other prominent reasons include the rise in fuel prices, rural distress due to lack of rains in certain regions of the country, new insurance laws leading to increase in its costs, a slowdown in certain industries leading to dip in consumer sentiments. According to the industry insiders, the slump in sales since around one year is triggering massive job cuts in the sector, which offers employment to around 35 million people directly and indirectly. As per reports, the initial estimates suggest automakers, component manufacturers and dealers have together laid off around 3,50,000 workers since April.