The Pandemic Hastens Automation Of Low-Paid Jobs For Auto Parts Suppliers

Many of them had returned home after India’s lockdown to contain Covid-19 froze economic activity and prompted a mass exodus unseen since the partition. Amid uncertainty about a recovery, the supplier of pistons, piston-rings and castings to companies including Maruti Suzuki India Ltd. and TVS Motor Co. intends to switch to low-cost automation.

“I’m not going to hire anymore,” Arora, owner of Abilities India Piston and Rings Ltd., told BloombergQuint over the phone. His firm is now operating at 75% manpower at 300 employees, including those with diplomas and low-skilled migrant workers. Arora said he plans to invest about Rs 1 crore this year to automate processes likes ‘pick and place’ and inspections and reduce manual intervention on eight manufacturing lines through low-cost robotics. “The idea is that it should pay back in the same financial year.”

Shortage of manpower during the pandemic may hasten automation of low-paid jobs in India, the kind of work that draws millions of unskilled workers to industrial belts. That may be another headache for policymakers as the nation battles unemployment. But for the $57-billion auto component sector, employer to nearly 5 million, it’s a question of survival. Even before the outbreak, according to Automotive Component Manufacturers Association of India, business shrunk 13-15% in the year ended March as Indians cut spending. This fiscal, it fears a 15% contraction.

About 70% of the workforce for auto parts makers comprises migrants and when there’s a shortage of manpower, the only recourse is automation, said Vinnie Mehta, director-general of the lobby. Transition towards automation will slowly shift the dependence on more skilled labour, he said.

Too Early To Predict A Revival

April saw a complete washout and capacity utilisation of component makers stood at a mere 8-10%, players BloombergQuint spoke with said—they spoke on the condition of anonymity out of business concerns. The situation has started looking up in June.

Demand for two-wheelers and rural India hold out hope. And as more people start stepping out, even parts suppliers expect personal mobility will find favour, boosting demand for scooters, motorcycles and cars.

Mehta said Maruti Suzuki, India’s largest carmaker, plans to make 40,000 cars in June and is projecting upwards of 1 lakh units in July.

“It’s fair to say rural India is the only saving grace at the time being,” said Sunjay Kapur, chairman of Sona Comstar, a Gurugram-based auto parts maker.

Ashok Taneja, managing director and chief executive officer of Shriram Pistons & Rings, the maker of piston pins and rings and engine valves, cited tractor and two-wheeler sales for the optimism. Demand for tractors has already crossed 80% of pre-Covid-19 levels, while for two-wheelers it’s around 50-60%.

Mehta, however, cautioned that these are early signs and it’s hard to predict business. The uptick, he said, could even be pent-up demand. “There’s still no clarity on the demand side of business.”

Road Ahead

All factories BloombergQuint spoke with said labour is a concern. Unable to forecast demand, they aren’t sure how many workers they will need.

“The biggest challenge is reverse migration, bringing the workers back is one of the key efforts,” Kapur said. In certain areas, the firm has been operating at full strength, while in others it’s managed with half the staff. Shriram Pistons is also focusing on simplifying business and shop-floor processes and communication with suppliers.

Taneja said the company has accelerated efforts towards “affordable automation”. The firm requires workers to manage casting of aluminium alloys to precision machining and surface treatment. “To train new workers when there’s shortage, it will ideally take a few weeks or months,” he said. “If I have automated the processes, then I can even put a new worker with a day or two of training on the job.”

Taneja said he will eventually hire fewer people and automation will improve quality consistency and productivity, and flexibility. Routine jobs would disappear but highly-skilled jobs will increase, he said. “It also leads to right-sizing of manpower.”

Most of these efforts will cut costs. Yet, a revival depends on demand. Amid uncertainty, most companies have deferred capacity expansion and are only investing in technology wherever required immediately. “Any expense that can be postponed is being postponed,” Taneja said.

Sanjay Sabharwal, managing director of Jamshedpur-based Metaldyne Industries Ltd., a supplier of metal parts to major automakers, has a gloomy outlook. The firms that can survive the next 18 months will be left standing, he said. “If the market doesn’t improve, one in three firms catering to commercial vehicles will shut, while one in four firms catering to the auto sector will close down.”

Mehta of ACMA said while the government has been able to manage supply side of the business by offering collateral-free loans, and change in definition of MSMEs and small businesses but it won’t help unless demand is also sorted. “Long-pending demands have been if goods and services tax rates can be dropped down to 18% at least for a short duration and if an incentive-based scrappage policy be brought in,” Mehta said. “These could create demand.”

Arora too doesn’t want to make any projections and is taking a month at a time. He said demand needs to be assessed monthly and projections are out of the picture. For him, Covid-19 is survival of the fittest.