Automakers such as Maruti Suzuki, Hyundai Motor India, Bajaj Auto and Honda Motorcycle & Scooter are diverting production meant for exports to meet local demand.
Mumbai: India’s leading automobile companies are facing a piquant problem.
Their factories are running at peak capacities, but the companies are unable to meet surging domestic demand for vehicles in the run-up to the festival season.
Caught in a bind, automakers such as Maruti SuzukiNSE -0.65 %, Hyundai Motor India, Bajaj AutoNSE -0.12 %, Honda Motorcycle & Scooter and parts suppliers like Apollo Tyres are diverting production meant for exports to meet local demand.
Hyundai that until a few years ago was India’s top exporter of cars, is gradually shifting export production out of the country and is also resorting to shipping vehicle kits instead of fully built vehicles to free up capacities to meet increasing local demand. Market leader Maruti Suzuki has kept exports stagnant, as the maker of the Alto and Swift chases fresh capacity to satiate requirements here.
“We are operating at 98% capacity utilisation and with the new product launches, we are expecting higher demand in the domestic market,” YK Koo, managing director of Hyundai Motor India, told ET.
“Diverting exports to other bases and converting completely built units export to completely knocked down form will help us generate an additional capacity of 1lakh units.”
This capacity will help Hyundai cater to the expected high demand for its new entry hatchback, the new Santro, which will call for higher domestic outlay.
At Maruti Suzuki, which too has been operating at almost 100% capacity, exports have remained 1.2-1.25 lakh units a year.
Its exports grew 1.3% annually to 1.29 lakh units between FY15 and FY18, when domestic volume increased 11.9%.
A senior executive told ET that the company could have deployed more capacity to the domestic market, but it maintained exports at around 1.25 lakh units to hedge against raw material imports — it imports nearly 16% of raw material.
Apollo Tyres, India’s largest manufacturer of tyres for commercial vehicles, now serves European and Middle East markets from its Hungarian facility, which allowed it to increase local supplies by 10-12%. The company also plans to set up a factory in Andhra Pradesh.
MD Neeraj Kanwar said the demand was very strong and some of his key customers were forecasting strong double-digit growth in sales. “For me, the issue is how fast can I put up the factory so that I don’t lose sale.
We are losing volumes due to lower capacity,” he said. Expansion in Hungary, and moving of export production to the European facility, will help address demand in the home market for the time being, he said. Bajaj Auto, too, has ensured the growing local three-wheeler segment got priority over exports in the recent quarters.
Rival Honda Motorcycle & Scooter, meanwhile, will be allocating more capacity for the home market even as exports are rising for the India unit of Japanese manufacturer.
YS Guleria, senior vice-president of sales and marketing at Honda Motorcycle & Scooter, said production and export plans were made keeping in mind the seasonality factors.
“Naturally, there is high demand during festivities and we don’t want to miss out on it for the lack of capacity,” he said. For Bajaj Auto, three-wheeler demand picked up in several states with the opening up of new permits and removal of the permit system in Maharashtra.
The company management in the June-quarter earnings call said domestic three-wheeler volumes should sustain around 30,000 units a month and that the company had been gaining share in the diesel and cargo segments in the local market.
Balkrishna Industries, a manufacturer of off-highway tyres which gets more than 80% of revenue from exports, is witnessing higher growth in the domestic market. In the past three quarters, its sales volume in India grew 0.9%, 25% and 3.9% on year, respectively. These were faster than its total volume growth.[“Source-economictimes”]