Trends: Auto, Indian auto companies, Maruti Suzuki India, Tata Motors, Ashok Leyland, Hyundai Motor India

Auto cos may take a hit of Rs 1,000 cr

Indian auto companies are likely to take a hit of Rs 1,000 crore on unsold cars, trucks, buses and two-wheelers after the government announced a 4% excise duty cut.
Maruti Suzuki India (MSI), Tata Motors, Ashok Leyland, Hyundai Motor India (HMIL), Honda Siel Cars, Mahindra & Mahindra (M&M) and others had built up huge inventories in the past several months due to a drop in sales.

Auto makers announced new prices taking into account the 4% cut. But they will be impacted financially as they will sell vehicles made before December 7, for which a higher duty was paid at lower prices. They will reimburse the auto dealers for the difference in prices.

Maruti had already reimbursed about Rs 50 crore to its dealers in March this year, when the government announced a 4% excise cut on smaller cars in the annual budget. Other companies had also compensated the losses of their dealers

The automobile sector has been hit by falling sales. Passenger car sales dropped 9% to 1.26 lakh in the domestic market even though production grew 2.4% to 1.6 lakh vehicles in October. The commercial vehicles sector was hit even harder as domestic sales dropped 36% while production dropped a lower 25% in October. Facing slowdown in the market, manufacturers have been facing huge stock of unsold vehicles and stacking inventories with their dealers.

The payout will be much high for trucks and buses. It could be in the range of Rs 2 lakh for the heavier range of commercial vehicles.

As per industry experts, around 10% of the 9 lakh vehicles produced per month are unsold. The current slowdown in the domestic market could have taken it to around 15% of monthly production, which is lying at company’s stockyards and dealer shops across the country.

December 9, 2008
Soure: Economic Times
URL: http://economictimes.indiatimes.com/News/News_By_Industry/Auto/Automobiles/Auto_cos_may_take_a_hit_of_Rs_1000_cr/articleshow/3810804.cmse:Economic Times