India's Largest Auto Maker Sales Plunge on Labor Problems

Maruti Suzuki has lowest monthly sales in 10 years.

India's biggest carmaker Maruti Suzuki on Tuesday posted a 53% slump in monthly sales -- its worst for a decade -- after production was hit by a long-running labor dispute.

The New Delhi-based company, majority owned by Japan's Suzuki Motor Corp, said it sold a total of 55,595 vehicles last month -- a drop of 53.2% from 118,908 vehicles in the same period last year.

"The labour unrest at the Manesar plant during October adversely impacted production and sales numbers," the company said.

Mahantesh Sabarad, an auto analyst at Fortune Equity Brokers in Mumbai, said: "This is Maruti's sharpest percentage decline in monthly sales for a decade.

"It's been hit by a series of strikes but has scope to ramp up production in the coming months," he said. .

Maruti lost production of more than 40,000 cars in October as a result of the labour trouble at Manesar in the northern state of Haryana.

Fortune Equity Brokers' Sabarad said there was an order backlog for around 100,000 Swift models, which are among Maruti's best-selling cars.

The company has now reported a year-on-year decline in car sales for five straight months since the start of industrial action in June over recognition of a new union and claims of worker sabotage.

The disputes erupted as Maruti has been battling to boost its market share, which has shrunk to 39% from 55% in the past four years, as other global auto giants seek a foothold in India's fast-growing vehicle market.

The recent stoppages at Manesar have cost the firm at least 19.50 billion rupees (US$400 million) in lost production since June.

Among other companies, leading vehicle maker Tata Motors said its domestic sales in October slid 3% year-on-year to 25,746 vehicles but sales of its flagship small cheap car, the Nano, surged 26%.

Hyundai Motor India reported its vehicle sales fell 7.45% to 48,325 in October.

Normally during the religious festival season, which runs from August to November, consumers make big-ticket purchases such as for cars. But this year "sentiment has been tepid" said sales chief Arvind Saxena. "We don't expect a major upswing in the near future, the challenging economic environment is affecting the industry."

Demand for cars has been hit by rising prices due to steeper commodity costs and 13 interest rate hikes since March 2010 to tame near double-digit inflation that have pushed up borrowing expenses, analysts say.

"Buying will remain lackluster until year-end," said Deepak Jain, an auto analyst at Mumbai brokerage Sharekhan, predicting people were likely to delay buying cars until inflationary pressures ease.

The Society of Indian Automobile Manufacturers has sharply lowered its sales growth forecast for the current financial year to 2%-4% from 10% to 12%.

Copyright Agence France-Presse, 2011

See Also
Labor Dispute Ends at India's Maruti

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