Economy

Auto sector stares at job cuts as sales continue to skid

S Ronendra Singh New Delhi | Updated on July 10, 2019 Published on July 10, 2019

Contraction is seen across all segments, is the worst in 10 years, says SIAM

Auto industry employees may bear the brunt if sales continue to fall, as the companies will be compelled to shed manpower, the Society of Indian Automobile Manufacturers (SIAM) said here on Wednesday. Already, no fresh recruitment is happening.

The production volume of passenger cars and commercial vehicles has also been the lowest in the last 71 months, SIAM said, said adding that it will approach the Centre for relief mechanisms, including a GST rate cut.

Asked if there has been any job cuts over the last 10-11 months, SIAM President Rajan Wadhera said: “I don’t think we have reached that phase, but we are soon going to be there. We can’t survive at this moment. At SIAM, we support the electric vehicle plan of the government, but at the same time, we must survive during this (transition) period. The current technology that the industry has should also be protected through this phase.”

The de-growth in the auto sector is likely to be replicated in the other sectors, too, he added. The auto sector today employs about 37 million people, and they need to be protected, he added.

Cash-strapped players

The companies have no growth plans also right now because of the cash constraints, and they have already spent much (₹70,000-80,000 crore) to upgrade their products to meet BS-VI norms, said Wadhera.

The dealerships have seen a lot of outlets (around 300, per Federation of Automobile Dealers data) closing down in the recent past, which is not a good sign, he added. The huge inventories are just beginning to be cleared up, he observed.

The de-growth in the auto sector today is significantly prolonged, and the worst since 2008-09 and 2011-12, SIAM said. “But, that time, every segment was not de-growing. Here (present scenario), it is every segment…it is an unusually prolonged de-growth. There have been batches earlier — like in one or two quarters — but never like this,” Wadhera added.

According to SIAM, usually, the first quarters see good sales across all categories, but this time round that has not happened because of the slowing economy, low consumer sentiment, poor finance availability, drop in rural demand and increase in insurance cost.

The June quarter of FY20 recorded some of the worse sales in the domestic market across all categories.

Weak dispatches

Analysts said wholesale dispatches are likely to remain weak for the next one or two months, and some signs of recovery are expected from the festival season only.

Consumer sentiments remain poor, and this continues to weigh on the demand for discretionary items like cars, said Ashish Modani, Vice President & Co-Head, Corporate Ratings, ICRA. “The government’s push to recapitalise banks and improve liquidity in NBFCs is positive for the economy, the benefits of which will start reflecting in the next few quarters,” eh added.

 

 

Published on July 10, 2019
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