Hero MotoCorp shuts plants from Aug 15-18, says market situation to blame

India's largest two-wheeler maker, Hero MotoCorp has decided to close its manufacturing facilities for three days. The reasons stated are annual holiday and due to the prevailing market condition. After car makers announced plant closures for a few days, Hero will be the first two-wheeler maker to officially announce a temporary stop in production.

The company stated that production planning is a matter of advance monitoring of market dynamics and prudent demand forecasting. This helps us to plan our production well in advance, thereby enabling us to stay flexible, both in terms of volumes and production schedules, it said. 

"In line with this trend, our manufacturing facilities will be closed from August 15 to 18. While this has been part of the annual holiday calendar on account of Independence Day, Raksha  Bandhan and the weekend, it also partly reflects the prevailing market demand scenario," said the company in an announcement to the NSE. 

Mahindra & Mahindra (M&M) has already announced the closure of its plants for 8-14 days in July-September. Similarly, Tata Motors has announced closure for eight days, Maruti Suzuki for three days, Toyota Kirloskar also for eight days, Ashok Leyland for nine days, Bosch for 10 days, Jamna Auto for 20, and Wabco for 19, according to reports.  

While Hero MotoCorp has five plants in India, the construction of its sixth manufacturing facility, at Sricity in Andhra Pradesh's Chittoor district, has reached an advanced stage. It will have an annual installed capacity of 1.8 million units. Once this facility is completed, it will take the company's total installed capacity to around 11 million units. 

The company reported sales of 535,810 units in July 2019, slipping 21 per cent from the same month a year ago, when the two-wheeler manufacturer had reported overall sales volumes of 679,862 units. The company's sales have been declining since the beginning of the current financial year, but it has been able to despatch more than 600,000 two-wheelers during the last two months.

In the April-July period this year, the two-wheeler market leader's production stood at 2,466,802 units, down 12.03 per cent from the year-ago period.   

The sluggish market environment prevalent in the first quarter has continued in the beginning of the second quarter as well, and its impact is visible in the despatch volumes. The outlook  for the rest of the year will be dependent on multiple factors, including the progress of   the monsoon and festive season offtake, as well as improvement in the liquidity situation, said the company.