The Indian auto industry is in the middle of one of its worst slumps with passenger vehicle sales down by 18.4% in the first quarter and monthly passenger vehicle sales fell by its biggest margin in 18 years. This could prompt automakers to cut production forcing companies to cut jobs.
India’s auto parts industry could be forced to divide a fifth of its 5 million or so workforce if the reduction in vehicle sales continues in this way, the president of the country’s largest industry group for auto parts makers said. India’s auto industry is in the middle of one of its worst slumps. Passenger vehicle sales fell 18.4 percent in the first quarter, and monthly passenger vehicle sales in June fell by the biggest margin in 18 years. The slump has affected automakers to cut production and automakers and parts makers to reduce jobs.
The drop in production “has led to a crisis like situation in the auto component sector,” Ram Venkataramani, president of the Automotive Component Manufacturers Association of India (ACMA), said in a statement late on Wednesday. “If the trend continues, an estimated 1 million people could be laid-off.”
The fall in the automobile sector, which accounts for nearly half of India’s manufacturing output, has been a major contribution behind the slide in economic growth to a 5-year low earlier this year.
Speaking to NDTV about the present condition of the auto industry, Jagdish Khattar, former Managing Director, Maruti Suzuki said, “The employment related to the automobile industry, direct and indirect is 35 million, which includes transportation, insurance, finance, dealership network, service, spare parts and all that. So, it’s huge employment and not a couple of million. The total output is ₹ 8.30 lakh crore.
He said again, “The impression is manufacturers are big names, the fact is 70-80 % of the production of the components comes from small and medium industries. Two years back, we used to have 40 percent diesel vehicles. Today it is less than 20. Rural areas used to have 30-40 percent of sales. The rural areas are distressed today. With Euro6, the industry has invested over a lakh and fifty thousand crores.
However, Euro6 hasn’t even come yet and we are talking about electric vehicles. Euro6 will increase the prices of cars, and the Supreme Court has said that you have to take three years of insurance. I mean, everything has gone wrong as this industry is concerned. Yes, it is not the only industry, others have also been affected but this industry has a very major role to play in manufacturing, employment, etc.”
“If the government was to reduce GST, it will not make much of a difference. There are far too many things. The economy should grow, people’s confidence should grow. People are losing jobs. If I’m losing a job, am I going to buy a car? No, I’m going to wait for it,” he said. Khattar also pointed out congestion, pollution, parking charges as some of the other factors against people buying new cars.
Venkataramani said investments in the automobile sector have been frozen due to a lack of clarity of government on its electric vehicles (EVs) policy. He said a government plan to speed up the rollout of EVs would raise India’s import bill and damage prospects for auto components manufacturers.
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