Ashok Leyland recently announced that its Pantnagar plant will be closed for 12 working days from 11 to 24 July. Companies like Tata Motors and Ashok Leyland are planning to close their factories in Pantnagar, Uttarakhand, to avoid inventory build-up, owing to the decline in demand for commercial vehicles (CV). In a notice issued by Tata Motors, as reported by The Hindu, to its employees, the company said: "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."
Auto major Ashok Leyland, too, will be closing the operations of its Pantnagar plant due to the same reasons. The company had also closed its factory in June for a week for arranging production with sales capacity.
The commercial vehicles sector has been facing declining demand for the past several months. Since the later half of FY19, sales have been going down and continuing in the current year as well. Production and consumption are becoming slow as well as the execution of the infrastructure projects.
Moreover, due to the poor cargo availability and deteriorating freight rates, fleet operators have been delaying purchases. NBFCs are going through liquidity constraints, which have also affected vehicle financing as half of the new truck sales are funded by them.
CV sales came down by 12 per cent in June at 70,771 units. Medium and heavy duty trucks reached 21,512 units after a 19 per cent decline. For the first quarter of the current fiscal year, overall CV volume came to 2.08 lakh units, another 10 per cent decline. Medium and heavy CV segment depreciated to 64,000 units after a 19 per cent decrease.
Particularly, Ashok Leyland's June sales went down by 23 per cent at 8,123 units and Tata Motors' volumes were at 19,358 units after 19 per cent decline. Due to these reasons, production cuts and temporary plant closures are becoming mandatory for alignment of production and demand in the company and industry, suggest experts.