This week in Auto: Festive period set to be a dampener; JLR drags Tata Motors to the negative

Tata Motors to slash capex for JLR to cut costs

Tata Motors, the parent company of Jaguar-Land Rover (JLR), said it will reduce capital expenditure by 2.5 billion pounds over the next two years to soften the blow from a sales freefall in China, even as uncertainty looms on future demand in the world's biggest automotive market.

The company will reduce capex in the two British brands by 11 percent over the next two years resulting in total savings of 1 billion pounds. Its capex plan now stands reduced to 4 billion pounds per year from 4.5 billion pounds announced earlier.

Royal Enfield loses 25,000 units to strike

Eicher Motors said it produced 25,000 units less during September and October of Royal Enfield bikes than earlier planned following a workers' strike at its plant in Oragadam, near Chennai.

Workers at the manufacturing facility were on strike last month asking for pay increment, right to organise unions and job security. The company stated that its facility-based forums will solve all concerns amicably and will remain engaged with associated officials.

Tata Motors posts Rs 1,048 crore loss in Q2

Tata Motors on Wednesday reported consolidated loss of Rs 1,048 crore for the quarter ended September 2018, impacted largely by disappointing performance of Jaguar Land Rover which also reported loss of 101 million pounds.

Profit for the September quarter 2017 stood at Rs 2,483 crore. On sequential basis, loss has been narrowed from Rs 1,902.4 crore in June quarter. Provision for impairment of capital work-in-progress and intangibles under development (Rs 93.21 crore) and provision for costs of closure of operation of a subsidiary (Rs 437.08 crore) also hit bottomline.

Carmakers fear a muted Diwali this year

Discounts on Maruti Suzuki hit a new yearly high this year during the second quarter. A Maruti Suzuki official said discounts during Q2 was up 23 percent to Rs 18,750 than the same period last year. In addition to what was offered directly by the company, dealers come out with their own offers which often pushes ‘customer benefits’ value to more than 10 percent of the value of the vehicle. These benefits are free insurance or registration costs, extended annual maintenance contracts, free fuel, car and seat covers, gold or silver coins, exchange bonuses to name a few.

Manufacturers are not able to push volumes to the commercial segment either where demand has unexpectedly dipped sharply over the course of last few quarters. Hyundai, one of the biggest suppliers of vehicles to the commercial buyers who operate under Uber and Ola, has repeatedly seen only low single-digit growth this year.

High interest costs, increased insurance premiums, hiked fuel costs and the general negative sentiment in the market has taken a toll on retail off-take this year. Banks and NBFCs have slapped extra scrutiny on car loans in the light of increased cases of non-performing assets (NPA).

Only newly launched models have attracted demand. Hyundai, for instance, claims to have received more than 23,000 bookings for the all-new Santro. This Hyundai remained the only new model to be launched during this Diwali.

Struggling carmaker Ford received a bump up in volumes with the launch of the new Aspire. Tata Motors launched upgraded versions and new variants of the Nexon, Tigor and Tiago. Maruti Suzuki launched yet another limited edition version of the Wagon R.

With these new additions and extra discount offers, companies would struggle to go past their previous year’s total during the festive days. Dealers across the country are saddled with extra inventory which, if not liquidated before the end of the month, will result in production cut during December by carmakers.

Maruti Suzuki chairman R C Bhargava said if the inventory does not get corrected during the festive days, it will have a direct bearing on production schedules.