The huge drop in demand for petrol cars resulting from high petrol prices and better mileage from diesel cars has severely hit carmakers in India. Some of them have taken the extreme step of stopping production of petrol cars. Reports say Toyota Kirloskar has decided to temporarily stop production of petrol cars.
Fiat, the Italian carmaker is also planning to close its plants for a few days in a month. Maruti Suzuki has decided to stop production of petrol cars and run its annual maintenance of the plant while Tata Motors has decided to stop production of commercial vehicles for three days in its Pune plant this week.
Toyota Kirloskar, the first carmaker to stop petrol car production has stated that it has an inventory of cars that will last more than 30 days and hence to control stock it had to stop production. Petrol car stocks of other carmakers are also increasing as sales have diminished to low levels.
Fiat India has stated that it is constantly monitoring its inventory levels. Demand for Fiat's petrol cars have been considerably low and any drop in production will help maintain stocks. It has plans to shut down its plants for 2-3 days next month depending on current demand. Fiat has built just over 1,000 cars in May down by more than 50%.
Demand for diesel cars also seems to be reducing as waiting periods for Toyota's diesel variants are coming down. Moreover demand for commercial vehicles also seems to be coming down. Tata Motors' plans to shut down its Pune plant for three days is a clear indication of dropping demand.
Carmakers are in a desperate situation to cut costs. The increasing input costs and low sales have put pressure on their purses which has resulted in plans to cut production. If petrol prices come down further and lending rates become more reasonable, car sales can be expected to revive.