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Mahindra & Mahindra (M&M) on Wednesday cautioned of job losses in the auto sector owing to the ongoing slowdown in the industry. The company reported a 26 per cent decline in profit to ₹918 crore in the first quarter of the current financial year as compared to ₹1,238 crore in the corresponding quarter last year.
M&M reported an exceptional gain of ₹1,367.05 crore during the period on the sale of shares of M&M Benefit Trust and buyback gains on transfer of certain long-term investments. Including the one-off gain, the automaker’s profit stood at ₹2,260 crore compared to ₹1,257 crore in the corresponding quarter.
Overall revenues fell 4 per cent to ₹12,805 crore. Pawan Goenka, Managing Director, M&M said that the automobile industry is currently going through one of its worst slowdowns in recent times. Such slowdowns were seen in 2002, 2008-2009 and 2013-2014, with each one lasting 6-8 months. He said that it is not clear if it is the reduction in excise duty that helped cushion the impact of the slowdown.
He identified a relief in GST as a “very big need” right now and that at least 4-6 per cent reduction in the GST can be helpful.
Workforce reduction
Talking about the job losses triggered by the slowdown, Goenka said: “Employment is a big concern...in the current environment, there is a huge danger of job losses, which are happening in four areas: OEMs, suppliers, dealers and the unorganised sector.”
For the PV segment, Q1 FY2020 is the fourth consecutive quarter of reduction, the worst ever de-growth since Q3 FY2001. PV demand is impacted by the slowing down of the overall economy, which along with tight credit conditions and delayed monsoon has impacted consumer sentiment in both urban and rural India.
Agri-sector stress
The stress in the agri sector and finance availability has impacted the demand for LCV 2-3.5T (Pik-UP segment). The HCV goods segment has posted a de-growth of 32.0 per cent, the worst reduction in 23 quarters. The slowing down of economic activity coupled with the increase in freight capacity of existing fleet, due to implementation of new axle loading norms, has resulted in transporters either reducing or temporarily suspending their fleet purchase plans.
Goenka said that M&M had a reasonably good performance. “For automotive business, we increased our market share in passenger vehicle, we increased our market share in three wheelers, (and) we retained our market share in commercial vehicles. We retained our market share in tractor business...We reduced spending in both automotive and tractor business. We have a reasonable control in inventory, and therefore, given the overall macro situation, we think that Mahindra has managed a reasonably good performance in the quarter,” he said
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