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Auto majors feel the credit crunch, shut down plants

Nov 07, 2008 10:15 PM IST Business Business

New Delhi: The timing could not have been more worse for the Audi R8, for the luxurious sports car hits the Indian market at a time when the country’s automobile sector is battling a slowdown in demand and cutting down output. While, Ashok Leyland — India's second largest maker of trucks, buses and other commercial vehicles by sales — has decided to shut down its Hosur and Ennore plants for 12 days each in November and December, Tata Motors is in the middle of a three-day shutdown of its Jamshedpur plant. The automobile giant also plans to shut its Pune production line for a week. Analysts predict that things could get worse. “It will be doubly difficult now to reverse this trend because the sentiments are bad. You have stock market going one way and currencies the other. That has led to bad global sentiments. Unless we adopt a proactive approach, we will not be able to get out of this crisis,” says director-general, Society of Indian Automobile Manufacturers (SIAM), Dilip Chenoy. Ashok Leyland — whose sales in October halved — blames difficulty in availing loans and high interest rates for this trend. The sales slowdown is forcing manufacturers to cut down on expansion plans. “I don’t think in this economic environment, anybody is looking at. So we'll see that Capex will go down by 60-70 per cent over the next couple of years,” CMD, TVS Suzuki, Venu Srinivasan says. The cascading effect of the crunch is being felt by manufacturers of automobile components as well. With payments delayed and loans difficult to secure, component makers are cutting down production and laying off people. The sector — which expects business to drop by a third in November and December — has already started pressing the panic buttons. It has asked the government for a two-three year relief in duties and taxes in order to survive.