Surest signs of a slowdown: Indian car makers like Maruti Suzuki, Toyota, Volkswagen and Tata Motors temporarily stop production

The slowdown is here and it’s official. Car makers in India, ranging from bellwether Maruti Suzuki to homegrown Tata Motors, have all began cutting down on car production as unsold inventory piles up. This move reflects the depressed buyer sentiment, who are now simply not walking into car dealerships across the country and walking out with cars. The car buying has definitely reduced over the past few months, after the strong growth the car industry witnessed for the past few years, on the back of big demand. While diesel cars got a bump up in sales due to the increasing gap between prices of petrol and diesel, we now are in a situation where diesel car demand has also slumped, the clearest indication yet of the Indian car industry in the eddy of a slowdown.

2012 Maruti Alto Small Car

For instance, many diesel car models, which once commanded long waiting periods are now available off the shelf. Coming to the production cut across car makers in India, Maruti Suzuki had already cut production of its petrol car models like the Alto, Omni, A-Star and the Estilo for 3 days last month, while the annual plant maintenance that will happen later this month is another step aimed squarely at reducing inventory. Tata Motors is cutting production of its commercial vehicles for three days beginning from June 22nd.

Similarly, Toyota is another automaker that has gone slow on petrol car production while Volkswagen has also cut down on production as dealer have stopped ordering new cars amidst growing inventory. Petrol cars sales have simply fallen off a ledge as the price difference between petrol and diesel is the highest now, with every liter of diesel more than 30 rupees cheaper than petrol. While this has caused a big tilt in car demand towards diesel cars, high interest rates on car loans have meant that even diesel car sales have slumped in the past couple of months.

2012 Tata Manza Sedan

The double whammy of high petrol prices and interest rates have been big factors that have caused demand to slow down significantly. Also, the overall economic outlook in India is muted with a lot of uncertainty prevailing over the monsoons, which have been delayed. Any deficiency in monsoons is expected to cause rural consumption to dip quite dramatically and this will only cause further slowdown. For now, the car industry in India can only hope and wait for the economic turbulence to clear up.