Automobile makers must not shy away from temporary shutdown of a manufacturing plant, to align supply with demand, says Ernst & Young.

“Production cuts are a natural fall-out of a slowdown. Given the demand slump in the industry, original equipment manufacturers (OEM) must look at temporary shutdowns if they have to, in order to manage their production schedules better,” said Kapil Arora, Partner – Advisory Services, Automotive Risk Advisory Leader, E&Y.

This is a prudent approach and need not necessarily cause panic in the industry, said Arora, on the sidelines of a recent conference on commercial vehicle trends.

In November, Tata Motors had a three-day shutdown at its Jamshedpur plant to prevent an inventory pile-up. Commercial vehicle manufacturer Ashok Leyland recently announced a reduction in working days from six to five days a week.

Auto component makers are working at only 60-70 per cent of their capacity.

But OEMs must communicate their intentions and actions responsibly to their suppliers and dealers. Early warnings must be given to these small and medium-scale players. This causes minimum financial implication and disruption.

Vehicle manufacturers are at the top of the food chain and what they do literally dictates the way the rest of the industry behaves, said Arora.

Commenting on the commercial vehicles industry, Arora said the next two to three quarters are likely to be challenging, especially for the medium and heavy commercial vehicles.

It will only be offset by the sales of light commercial vehicles, which is seeing some momentum, he said.

>swetha.kannan@thehindu.co.in

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