Automakers May Have To Take ‘Critical Steps’ To Survive Amid Slowdown, Says SIAM

Indian automakers may have to resort to “critical” measures, including a hiring freeze, as demand for passenger vehicles and two-wheelers is yet to pick up, industry body Society of Indian Automobile Manufacturers said on Wednesday.

“If this kind of situation continues, then the industry will have to take all kinds of measures, including not hiring,” Vishnu Mathur, director general of SIAM, told BloombergQuint when asked if the industry is contemplating job cuts.

He didn’t elaborate on what other critical measures would be.

Mathur, however, said there have been reports of dealerships closing, leading to job losses. “As of now, we don’t have reports of OEMs (original equipment makers) laying off people,” he said. “There have been reports about dealerships closing down, and when dealerships close, there’s a loss of employment.”

Automakers and parts suppliers have already started laying off contract workers in the Gurugram-Manesar belt, BloombergQuint’s conversations with employees and union members had revealed. That came as carmakers, including market leader Maruti Suzuki India Ltd., cut production as demand hasn’t picked up since Diwali. The poor run continued in June.

Domestic passenger vehicle sales declined 17.54 percent year-on-year to 2,25,732 units in June, according to data released by SIAM, with car sales dropping 24.97 percent over last year to 1,39,628 units.

Here’s how sales in other segments fared in June:

• Motorcycle sales declined 9.57 percent to 10,84,598 units.
• Sales of commercial vehicles dropped 12.27 percent to 70,771 units.
• Two-wheeler sales fell 11.69 percent to 16,49,477 units.

This kind of prolonged auto sector slowdown has not been seen in more than a decade, SIAM President Rajan Wadhera told reporters. The industry, Wadhera said, will have to conserve resources and that will depend on company-to-company. The ability of medium and small enterprises to withstand contraction is probably not over three months, he said. He said companies can cut costs, among other measures, to tide over the situation.

The government extended concessions, including lower GST rates and custom duties, in Budget 2019 to push electric vehicles.

Mathur welcomed the government’s decision to push for faster adoption of electric vehicles but said the traditional internal combustion engine industry shouldn’t have been ignored. He said the industry had asked for a stimulus from the government in the form of GST rate cuts and a scrappage policy.

“If you don’t do these things, then the industry will go deeper into the recession and it will become quite difficult for economy to recover.”

Watch the full video of the interaction here: