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Hero Honda Motors Ltd., Bajaj Auto Ltd. and TVS Motor Co., India's biggest motorcycle makers, cut production as rising interest rates and the monsoon months have curbed demand.
Hero Honda, the nation's biggest motorcycle maker, cut production starting June, Ravi Sud, the company's chief financial officer, said in a telephone interview today. Bajaj, the second-biggest, cut output of some motorcycles by as much as 10 percent, Sanjiv Bajaj, its finance director, said in a separate interview.
``We are producing in line with demand,'' Sud said. ``June, July and August are generally lean months because of monsoons. This year, we have also been hit by postponement of purchases because of higher interest rates.''
The production cut comes as the benchmark interest rate in India has risen to a five-year high, damping purchases in a nation where majority of scooters and motorcycles are bought on credit. Shares of the three top motorcycle makers have lagged the benchmark index in the world's second-largest market for motorcycles.
Hero Honda shares fell as much as 3.6 percent today after the company announced the production cut. It changed hands at 701 rupees, 1.8 percent lower than yesterday's close, at 11:30 a.m. in Mumbai. Bajaj fell as much as 1.3 percent and TVS 2.1 percent.
Sale of motorcycles and scooters generally slow down from June until September each year because of monsoon rains in most parts of the country.
Commercial banks have increased their lending rates by between 200 basis points and 250 basis points since December. State Bank of India, India's biggest commercial bank, said on April 7 it will charge its best borrowers 12.75 percent, the highest since April 1999.
Hero Honda's sales in June will be as much as 40,000 units lower than the 285,109 sold in May, Sud said.
Bajaj Auto, which trails Hero Honda, has cut production to reduce stocks at dealerships, Sanjiv Bajaj said.
``We cutting down dealer inventory, but this is not a permanent reduction in production,'' Bajaj said. The company's sales have fallen in each of the past two months.
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