Auto firms say won't make cars till there is clarity on retail sales

Indian carmakers, including Hyundai Motors India, Renault, Mahindra & Mahindra, have decided or are likely to extend suspension of production in their factories till May 3.

Others like Maruti Suzuki, the Volkswagen group, Tata Motors, and Kia Motors are undecided and will take a decision in a few days.

The move comes despite the Union government coming out with fresh guidelines allowing staggered production at factories, albeit with stiff riders.

Hyundai said the suspension will have a “cascading impact on new projects and shut down plans” as there was no clarity on “when retail sales would begin and how customers would respond”.

Renault Nissan Automotive India, in a mail on April 14 to its suppliers, said: “We are studying the hotspots to confirm the ramp up feasibility for all our suppliers. Still our plan is to start the plant in June.”

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M&M is likely to extend the suspension of production till the May 3. A source aware of the company’s plan said: “We cannot start production in Haridwar. Though it qualifies under the new guidelines, most suppliers are in the western region, so it does not help.” The source said the priority would be to liquidate inventory.

A source in Tata Motors said: “In principle, Tata Motors can resume operations as it conforms to the criterion based on location. But a final decision will be based on supply chain dynamics… A seamless supply chain can be established only if all regions are producing.”

A source in the know of Kia Motors’ operations said though its unit in Anantapur, Andhra Pradesh, could resume production, it was yet to take a call because of supply chain issues.

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Maruti Suzuki Chairman R C Bhargava said it was the firm’s understanding that the state government would identify industrial estates or areas like Manesar (where they have their factory), within the Gurugram district and give permission.

But, he said, that was not the primary issue. “For us, the key issue is whether we can produce the car. If many of our direct vendors and their tier-2 and 3 suppliers (1,300 odd) are in red zones, what is the point of asking for permission to open at all? This process for us will take 2-3 days before we take a final call,” said Bhargava.

Volkswagen is also in two minds. Gurpratap Boparai, managing director of the group, said with 5,000-6,000 workers in the firm’s factories and those of its vendors it would be impossible to provide accommodation as the infrastructure did not exist in Chakan in Pune.

Auto components manufacturers are also looking for clarity. Said Nirmal K Minda, chairman of Minda group: “There is no point in building stock if firms cannot sell. We are waiting for clarity from local authorities and customers.”

Sharad Malhotra, president of Nippon Paints India, said the firm was expecting clarity from the Haryana government on whether its unit, which was in a red district (Gurugram), would be allowed to function. “At the moment, while we are preparing, even setting up a dormitory in the factory, there is confusion whether we will get permission” he said.