Fresh demand to spur two-wheeler growth

NEW DELHI: Automakers are scaling up production capacity to meet the demand spurt during the upcoming festival season with some companies being forced to assemble parts manually having failed to set up a conventional automatic production line in time.

Although vehicle makers face demand spurt during the October-November period that coincides with various religious festivals across the country every year, this season is specially challenging as automakers have already been struggling to meet consumer demand that has bucked industry projections.

The country’s largest carmaker Maruti Suzuki has put together a temporary production line, its first to be operated manually. “After exhausting all means to increase production, we have put up this temporary line at Gurgaon plant where cars are not being assembled on the conveyer belt, rather we use push-carts to move the assembly of cars to meet the festive demand,” said RC Bhargava, chairman, Maruti Suzuki.

The festive season demand sets in with the beginning of Navratras in October and stretches up to mid-November for Diwali. Sales increases as most customers consider buying metal products auspicious during this period.

Other vehicle makers are also ramping up their manufacturing capabilities. Toyota Kirloskar Motor has advanced expansion at its first plant that produces the Innova, Corolla and Fortuner vehicles. Earlier, the expansion was expected to begin in January 2011. “The expansion of the plant in October-November would gear up to take the production to 80,000 units per year that would help us tide over the current shortages and also meet the extra festive demand,” said Sundeep Singh deputy MD (marketing), Toyota Kirloskar Motor.

Auto companies usually start building inventories 2-3 months prior to the festive season, but consistent high demand in the past few months has wiped out planned inventories.

Domestic automobile sales have been on a record breaking spree this fiscal with the industry clocking 12.63 lakh units in August, the highest ever achieved in a month and a tad higher than the previous best of 12.37 lakh units clocked in July.
South Korean car maker Hyundai Motor India has shifted bulk of its production to domestic market from exports, while Volkswagen India has started a second shift at its Chakan plant a few days back.

Two-wheeler makers are also gearing up to meet the demand. Hero Honda, which is scouting for a location for its fourth plant, is planning to increase production from its Haridwar plant. “While we have maximised production at all our plant, the Haridwar plant would be tweaked to manufacture more during the festive season as we aim to clock 5-lakh retail sales next month,” a Hero Honda spokesman said.

It’s not just automakers who are burning the midnight oil to build up inventories. The component makers also trying to meet the demand pressures from automakers. “We would be working on all seven days a week. We have built up capacities, but the challenge is to ensure raw material supplies to meet a robust festive demand,” said Surinder Kapur, chairman of Delhi-based Sona Group.

Some component makers are outsourcing production to tier II and tier III suppliers to cope with the increasing demand. The Automotive Component Manufacturers Association of India (ACMA) said, that some of the capacity expansion in progress would come as a breather for manufacturers during the peak festive season. “As sales has been consistently high for past few months, we are not expecting much spike in festive demand. But the new capacities would help us tide over the temporary hike in demand,” said Srivats Ram, president of ACMA.