Plants of most auto companies are running at a paltry 30 to 50% of existing capacity with a sole aim to bring down inventories.

The companies which had scaled up production during the festive season, quickly came down to a lower gear as subdued sales resulted in higher inventories in the sector.

Tata Motors, the country's biggest auto manufacturer by revenue, Mahindra & Mahindra, ultility vehicle and farm equipment manufacturer, Maruti Suzuki and General Motors India all have cut production to bring down inventories.

Even historically-high discounts during the festival season failed to boost sales due to the slowdown in economy and negative sentiment of customers.

Pawan Goenka, executive director of Mahindra and Mahindra, said, "For commercial vehicles, the average capacity utilisation of the industry is around 30% while for passenger vehicle, it is 50% or slightly higher than that."

Goenka said the situation is unlikely to improve within the next two quarters.

The festival season sales were not enough to revive demand in the sector and the stress will continue in the near future.

A senior official from Tata Motors too said capacity utilisation of the company is around 50%. "Capacity utilisation has slightly improved due to the festive season resulting in higher inventories," said the official.

Ranjit Yadav, president for passenger cars at Tata Motors, said despite arrival of the festival season, sales have not picked up and as a result companies are offering higher discounts. Even inventories are on the higher side, he said.

General Motors too is operating at less than half of its existing capacity. "At the moment our capacity utilization at both our manufacturing facilities at Hallol in Gujarat and Chakan, near Pune is at about 45%," P. Balendran, vice-president at General Motors India, said.

Due to sagging sales on account of the economic slowdown, even the automobile industry as a whole has cut down producing vehicles by about 45%.

The market turnaround was expected in the second half of 2014.

"Overall, the auto industry was down and entering negative growth except for the newly launched models this year which were adding good numbers to their respective companies," Balendran added.

Maruti Suzuki, the country's largest passenger car manufacturer however claimed that the company has been able to retain it sales as per last year's level.

"We have not actually cut down on our production schedules as we have so far managed to keep our sales performance in line with the corresponding period of last year. At present, the production schedules continues as normal in two shifts with 10,000-plus work force at three production facilities at Gurgaon and two at Manesar," an official spokesperson at Maurti Suzuki, said.

"The company has been able to maintain their volumes as they have very strong network in the rural market. Rural India is growing as a result the company has managed to retain sales," said a stock-broking analyst.

Analysts said while companies increased production anticipating better sales during the festive season, sales remained subdued compared to a year ago.

As a result, inventories in the sector have gone up.

Another stock-broking analyst said, "Most of the companies including Tata Motors are operating at 50% of their existing capacities. While passenger vehicle segment is operating at slightly higher capacity it is the commercial vehicle segment where the sales are really down and companies had to cut production levels drastically in some cases companies are operating at only 30% of their existing capacities."

An analyst at a stock broking firm said while Mahindra & Mahindra has inventory of around four to five weeks, it is much better compared to other players. There may be inventory of around six to eight weeks for other companies.

An analyst mentioned earlier too said inventory levels are around five to six weeks on an average for the industry.

Another added that going forward, volumes will remain weak in the third quarter as well. "Although sales are improving sequentially but it continues to be significantly low compared to last year. Only the two-wheeler segment is expected to perform well while the remaining segment will continue to remain subdued for the next couple of quarters."