More job cuts at Indian carmakers likely amid sales slump: industry official

30, Jul. 2019

Traffic in New Delhi. India’s production and sales of vehicles across all categories have declined since December. (photo: Press Trust of India)
Traffic in New Delhi. India’s production and sales of vehicles across all categories have declined since December. (photo: Press Trust of India)

By Atul Ranjan

NEW DELHI, NNA - Indian carmakers may be forced to cut more jobs amid sluggish domestic sales, a senior industry official has warned.

“The current 15 to 20 percent cut in vehicle production has led to a crisis like the situation in the auto component sector,” Ram Venkataramani, president of the Automotive Component Manufacturers Association of India (ACMA), told reporters last week. “If the trend continues, an estimated 10 lakh (1 million) people could be laid off.”

About 32 million people are employed directly or indirectly in India’s auto sector, according to government data.

Original equipment manufacturers are cutting production, forcing component suppliers to scale down their workforces, Vinnie Mehta, director general of ACMA told reporters.

“If the vehicle production cut is in the range of around 20 percent, it will have a similar impact on the employment numbers in the component industry,” he said, adding some 70 percent of jobs in the auto component industry are contractual.

Last week, Bosch Ltd., the flagship company of German engineering and technology giant, Bosch Group, announced the suspension of all manufacturing at its plant in Naganathapura in the southern Indian state of Karnataka for two days until July 29 “with a view to adjust production to meet the demand for products and to avoid unnecessary buildup of inventory.”

“I have never heard the component industry doing periodic shutdown…and now we are hearing Bosch doing shutdown,” Mehta said.

After a robust double-digit percentage gain in Indian vehicle sales from April to September last year, the second-half of the fiscal year that ended in March this year saw a slowdown, ACMA data released last week showed.

For the full fiscal year to March, sales rose 14.5 percent to $57 billion year on year, slowing from an 18.3 percent increase the previous year.

The Society of Indian Automobile Manufacturers (SIAM) has also warned of significant job losses if the slowdown persists.

Nissan Motor Co. is looking to reduce headcount in India as part of its plan to cut 12,500 jobs globally in the next three years, the Japanese company said on Thursday.

Nissan will first cut a total of 6,400 jobs in eight global locations including India by the end of the current fiscal to March 2020, and will then eliminate an additional 6,100 elsewhere by March 2023.

The slowdown has prompted the closure of 286 auto sales outlets across India in the 18 months to April, according to the Federation of Automobile Dealers Associations (FADA). “It’s a very significant number,” FADA President Ashish Harsharaj Kale told NNA.

India’s overall production and sales of vehicles across all categories have declined since December, According to SIAM.

“The automotive industry is facing an unprecedented slowdown,” ACMA’s Venkataramani said.

India’s economic growth decelerated sharply to a five-year low in the January-March quarter, also taking GDP expansion for the last fiscal year to the lowest since 2014, amid a domestic cash liquidity squeeze and global slowdown, official data released last month showed.

This led India’s central bank to cut interest rates at a third straight meeting last month, as widely expected. The Reserve Bank of India changed its policy stance from neutral to “accommodative” and revised down its domestic growth forecast for the current fiscal year ending next March.