Auto Industry Expect New Government to Boost up Utilization of Idle Capacity

Passenger car industry, after swear-in of new Government yesterday, expect huge policy reforms that help it utilize maximum of installed capacity. The SIAM numbers shows Indian Auto Mobile industry is just able to utilize about 55 percent of its current installed capacity.

 

Now all the players expect new policies that drive economic growth to enhance the demand level and auto industry specific policies that helps to fight against the labour problems, high cost of raw materials etc. Expecting high future demand, companies have invested about Rs. 20,000 crore in building new capacities but they remain unutilized as market continued to sluggish.

Industry expected sales to reach benchmark of 3 million vehicles but it remains untouched as sales fell 6.05 percent in the fiscal year 2013-14. Commenting on the issue, Mr. Vishnu Mathur Director General SIAM said, “Going by the sluggish market conditions, fresh investments in capacity building are unlikely,” and auto makers need to “carry on investments in developing new products, as well as ongoing research and development projects, notwithstanding the current slowdown.

The industry had major expectation when previous government reduced excise on the cars, but market did not turn up to the expectations of the industry. Now once again new government will showcase its mind to survive industry upcoming budget in June, 14. The new stable government is expected to perform better and revive growth rate and control inflation with much better instrument than used earlier.

P Baledran VP GM India said that “With a new stable government in place, we expect early implementation of second-generation economic reforms like GST (goods and services tax) and DTC (direct tax code) and speeding up of stalled infrastructural projects to revive the economy.

Due to slower demand growth in the domestic market almost companies have change their focus towards exporting cars to emerging markets from their Indian production. Look at the below chart which show capacity utilization by the industry players.

Manufacturing Company	Total Installed Capacity		Total Production during FY 14	Percentage
Maruti Suzuki		15,00,000	11,53,596	77%
Hyundai Motor		6,80,000	6,19,876	91%
Mahindra and Mahindra		6,87,000	2,60,197	38%
Tata Motors & Fiat		6,50,000	2,14,093	33%
Renualt and Nissan		4,00,000	2,20,747	55%
Honda Cars India		2,40,000	1,35,073	56%
Ford India		2,00,000	1,33,975	67%
General Motors		2,82,000	78,426	28%
Toyota Kirloskar		3,10,000	1,54,260	50%
Volkswagen & Skoda		2,19,000	93,280	43%
TOTAL		51,38,000	28,49,430	55%

Despite, lower capacity utilization, some of the auto players still wants to secure its future capacity of meeting demand, and are installing new capacity plants in the country. Ford motors in investing approximately Rs. 5900 crore to build new capacity that will add 2,40,000 units to its existing capacity. While Maruti is also working on first phase of its Rs. 3000 crore investment in Gujarat for capacity expansion.

Get More detail on Recently Car Market please visit here or rush at CarWorld1.