TELCO may cut output

CHENNAI, July 17: Hit by plunging sales, India's commercial vehicle giant Tata Engineering and Locomotive Ltd (TELCO) has decided to cut pr...

CHENNAI, July 17: Hit by plunging sales, India’s commercial vehicle giant Tata Engineering and Locomotive Ltd (TELCO) has decided to cut production by about 20 per cent for the second quarter of the current financial year. However, TELCO officials say that the overall target for the year continues to remain unchanged.

Chennai’s auto ancillary industry, which is a major supplier to TELCO, has been hit hard by the move. Most major (tier-1) suppliers to TELCO confirm that there has been a clear slowdown in offtake in July. According to these sources, TELCO’s Pune plant has borne the brunt of the cut with a clear 20-25 per cent drop in production during the month.

According to indications available, this trend is likely to continue through the second quarter of the current year. In the first two months of the current fiscal, TELCO had sustained its growth in production, despite a sharp drop in sales. For example, though light commercial vehicle (LCV) sales in April `97 had dipped to 5003 as compared to 6312 in April `96, TELCO had hiked production during the month to 7370 from 6942 during the same month last year.

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However, the company has now set its production schedules more in tune with the market trend. One tier-1 supplier, who supplies to almost the entire range of TELCO models felt that the Medium Commercial Vehicle (MCV) segment was the worst hit. He estimated that production of MCV’s have been slashed by as much as 50 per cent.

Another supplier who has a plant in Pune to cater to TELCO’s requirements said: “Earlier the Pune plant produced about 4000 MCVs every month. This has now been cut to a little over 2000 vehicles”. “We had a meeting with TELCO officials recently and the outlook does not look very encouraging,” he added.

“As we are tier-2 suppliers, we are yet to feel the full impact of the cutback. But we are given to understand that there has been a 15 per cent drop,” said the vice president-marketing of another vendor.

TELCO officials who were contacted by The Financial Express, initially refused to either deny or confirm that production is to be cut by 20 per cent. Later, to a pointed question in a faxed questionnaire on production plans for the second quarter, a senior TELCO official, in an ambiguous reply said: “Our overall production and sales plans for 1997-98 remains unchanged. The company has been altering the product-mix to cater to market requirements at any particular period.” He however did not divulge details on the production plans for the second quarter.

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The auto industry has been hit by a slowdown since the second half of last year. Though 1996-97 witnessed only a slowdown in growth rates, the commercial vehicle segment started off the current year with a negative growth of about 15 per cent in the first two months. While LCV sales slumped by 9.58 per cent, MCV and HCV sales plummeted.