By Rohit Vaid
New Delhi/Mumbai, Aug 2 (IANS) After decelerating sales and eroding automobile manufacturers' bottom lines, the consumption slowdown now threatens to unleash a downsizing trend in the sector.
Even though some retrenchment of non-permanent employees at the original equipment manufacturer (OEM) level is expected immediately, jobs at automobile part manufacturers along with those at dealerships and other associated industries will be hit the hardest.
According to industry observers, the month-on-month sales de-growth and inventory pile-up at the dealerships have forced auto companies to curtail production which will eventually lead to job losses at both factory and retail levels.
"Job loss is a possibility if the volumes don't pick up during post-monsoon and the festival months. This is expected to be across the supply chain which includes OEM, component manufacturers and dealer network," Sridhar V., Partner with Grant Thornton India told IANS.
"The industry has been looking at tax inducements or stimulus for the positive turnaround since that is expected to bring prices down."
The sales downturn assumes significance as the auto industry contributes around half of manufacturing GDP and 11 per cent of the total GST revenue.
It is estimated that the sector also supports almost 37 million direct and indirect jobs.
Recently, all major OEMs consisting of passenger, commercial, two and three wheeler manufacturers have reported a massive decline in domestic sales.
At present, the automobile sector has been impacted the hardest among major manufacturing sectors due to a consumption slowdown which is a culmination of high GST tax rates, farm distress, stagnant wages and liquidity constraints.
"The extent of job losses is difficult to say, but contractual labour is likely to have lesser employment opportunities in the sector," Richa Bulani, Senior Analyst, India Ratings & Research (Fitch Group), told IANS.
"More than 150 dealers have shut operations in past 18 months, which would have likely led to losses. If the situation persists for the second half of the fiscal, the situation could intensify."
Figures from the Society of Indian Automobile Manufacturers (SIAM) showed that domestic passenger car sales in June went down by 24.07 per cent to 139,628 units. The July figures are awaited.
In the commercial vehicle segment, domestic sales were down by 12.27 per cent to 70,771 units last month.
The overall sales of two-wheelers, which includes scooters, motorcycles and mopeds, edged lower by 11.69 per cent to 1,649,477 units.
The total sales of the Indian automobile sector declined by 12.34 per cent during June 2019 to 1,997,952 units across segments and categories.
The sales downturn has eventually led Indian automobile sector to reduce overall production by 12.98 per cent during June 2019 to 2,336,138 units across segments and categories.
(Rohit Vaid can be contacted at rohit.v@ians.in)
--IANS
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