Chennai, July 17: Hit by plunging sales, India's commercial vehicle giant Tata Engineering and Locomotive has decided to cut production by about 20 per cent for the second quarter of the current financial year. However, Telco officials say 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 the company confirm that there has been a clear slowdown in offtake in July.

According to them, Telco's Pune plant has borne the brunt of the cut with a clear 20 per cent to 25 per cent drop in production during the month.

According to indications, 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 production growth, despite a sharp drop in sales. For example, though light commercial vehicle (LCV) sales in April, 1997, had dipped to 5,003 as compared to 6,312 in April, 1996, Telco had hiked production during the month to 7,370 from 6,942 during the same month last year.

The company has now set its production schedules more in tune with market trends. A tier-1 supplier, who supplies to almost the entire range of Telco models, felt the medium commercial vehicle (MCV) segment was the worst hit. He estimated that production of MCVs has 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 4,000 MCVs every month. This has now been cut to a little over 2,000 vehicles. We had a meeting with Telco officials recently and the outlook does not look very encouraging.''

``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 a marketing vice president.

Telco officials, when contacted, 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, said: ``Our overall production and sales plans for 1997-98 remain 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.

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 by almost 20 per cent in April and May this year, as compared to the corresponding months last year.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.