Car makers ramp up production to meet burgeoning demand

Top car makers in India are at their heels to ramp up the production of their newly launched cars as demand surpasses supply for these much likable products. Lately many new cars like Mahindra XUV 500 SUV, Toyota Etios diesel sedan, Toyota Etios Liva hatchback, Maruti Swift diesel hatch were launched in market. While demand for the last three is enhanced due to introduction of the diesel engine of these cars, Mahindra XUV 500 has generated hysteria among car lovers due to its low cost. Evidently, Mahindra XUV 500 price is just Rs 10.80 lakh for starting variant, ex-showroom Delhi.

Due to sluggish sales and high priced components, the manufacturing activities of cars were low which led the car companies to lower their production targets. These car makers were completely unaware that their cars would be liked so much that their bookings will reach to an unimaginable time period. However, car honchos like Mahindra & Mahindra, Honda India, Toyota Kirloskar Motors, etc. have realized the situation well in time and nearly all of them are revamping their strategies for production. While XUV 500, launched last month, has booking orders of more than 7,000 units and waiting period of 17-18 weeks, the capacity constraints have led to a waiting period of over two months on Toyota Etios and Toyota Liva diesel cars. The order backlog of Honda Jazz is more than 3,000 cars leading to a waiting period of more than 4 -5 months. However, auto experts say that the immediate and long-term demand is very different for new launches. A good indication would be to see if the product has real demand even after a period of 6-8 months.

M&M which initially planned to produce 2,000 units a month will scale up production to 3,000 units now. Pawan Goenka, who occupies the post of President in Automotive Sector of M&M informed that even when they will ramp up capacity, it's always more difficult to ramp up capacity at the supplier end. Every supplier has to increase capacity, only then can the company increase its production. M&M deferred new bookings from October 11 as XUV 500 garnered 8,000 bookings in 10 days. The company now mulls to meet domestic demand of XUV 500 before taking the vehicle to other global markets.

Sandeep Singh, Deputy Managing Director (marketing) at Toyota Kirloskar Motor said that Toyota India will see the share of diesel cars moving up from 45% to 60% from next month. The Japanese auto major is enhancing production from 90,000 units to 1,00,000 units in the plant which makes Toyota Innova and Toyota Fortuner. In another plant, where Toyota Etios, Toyota Etios Liva and Corolla Altis are manufactured, production is being ramped up from 1,20,000 units to 2,10,000 units. Even Honda India has an order backlog of more than 3,000 cars for Honda Jazz which saw its sales picking up after a price revision this year. Jnaneswar Sen, Senior VP, Sales & Marketing at Honda Siel said in this context that the shortage of a micro-chip which comes from a factory in the quake-hit North Japan has led to a waiting period of more than 4 -5 months. He added that supply constraints are likely to be resolved by the middle of November.