Capacity crunch grips auto industry

The auto industry is in no mood to celebrate the rising sales volumes and spectacular results witnessed in the month of April'2010 as a severe capacity crunch has hit the industry. This issue is threatening the industry to an extent of being a blight on growth. All major segments like that of Passenger cars, commercial vehicles, two-wheeler sales all saw a roping percentage increase in the sales volumes.


The Society of Indian Automobile Manufacturers (SIAM) said according to the early predictions that the growth in the FY 2010-11 would be 10-14% as compared to 26% growth an year ago. Industry experts suggest that the demand is expected to decline by half due to the increasing capacity troubles. The crisis has hit the market due to the unexpected increase and turnaround in the demand last year. During the slow down every auto maker would be cutting down on its production.

Many major auto makers like Hyundai Motor India, Maruti Suzuki India & Tata Motors are already in the midst of the crisis. Maruti Suzuki has already announced an investment of Rs 1,700-crore to increase the capacity, but until it launches, the company is managing with its existing capacity and dealing with the customer demands with existing resources, says Maruti Suzuki India marketing head Mayank Pareek.

Hyundai Motors presently has a production capacity of 6.3 lakh car units annually. This year the auto major is expecting to reach a sales target of 6 Lakh units for which it has a bare enough production capacity.Rakesh Batra,  Ernst & Young automotive sector national leader suggests that both Hyundai and Mruti have problems with both their production a well as supply chain capacities.

Tata Motors has a capacity constraint with the production of its ace mini trucks, which is mainly due to driving its production resources to an assembly line of 50,000 units for the Nano.

Companies like Volkswagen, General Motors and Ford are on a happier front who have recently launched their small cars. Due to capacity worries of its rivals, these players have had it smooth to launch their hatchbacks. but capacity issues could play a spoilsport here as well, as the suppliers would anyday give priority to the existing players in the industry.

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