Market slowdown is real and may have prolonged effects; Many manufacturers are reconsidering or trimming fresh investments…
The current market slowdown is aggravating by each passing month. After significant drop in sales, manufacturers are pulling their hands up in terms of investments. This is bound to create ripple effects and the severity of this may extend to other sectors as well.
Doubling its guidance from Rs 700 crores for last year, Hero MotoCorp announced to invest Rs 1500 crores in financial year 2019-20. It was to be utilised in Bharat Stage VI upgradation, new product development and for the new plant in Chittoor, Andhra Pradesh. Midway into this year, amidst this slowdown, Hero is said to be reevaluating its investments in India.
Market Slowdown – Hero Trims Capex
According to a report at Financial Express, Hero will curtail its planned expenditure by 15 to 20 percent. A Hero spokesperson confirmed the development and said..
We will keep re-evaluating this in the coming months…
Another source claimed that some other expenses have also been trimmed along with investments for capacity expansion, till the demand sees an upswing.
Hero is down by 16 percent in this financial year so far in terms of sales and they have dropped production by about 17 percent in year on year numbers. The report also says that despite production cuts, Hero is still sitting on an inventory of over 60 days.
Two-wheeler sales were also hit in the last festive season due to the unreasonably long 5-year mandatory insurance ruling which hiked landing prices of scooters and motorcycles by upto 15-20 percent, almost overnight! Blaming this decision, Suzuki’s boss recently said that it started the downfall in the domestic market (more details).
Arch-rival Honda is also said to be reconsidering any new investments in India, at least till the market returns to normalcy.
Source – Financial Express