The spectre of large scale job losses looms over the domestic automobile industry, as a prolonged slowdown in demand for cars, two wheelers, trucks and buses is forcing companies to reduce shifts at their factories and align production with the falling demand.
Car market leader Maruti Suzuki said last week that it has asked 200 temporary workers at its fully-owned subsidiary Suzuki Powertrain India Ltd (SPIL) to go on leave. SPIL manufactures petrol and diesel engines for the carmaker, and Maruti said it has stopped one shift at the diesel plant in view of the falling demand.
“The scenario is getting worse every month,” said Vishnu Mathur, director-general, Society of Indian Automobile Manufacturers (SIAM). “So far we have not heard of companies deferring their investment plans, but hiring has stopped, and already temporary workers are being asked to go on leave. In an industry where demand is dictated by seasonality this does happen, but we do not know when growth will return, so it may get even worse.”
The automobile industry, including ancilliary units, employ over 15 million people directly and indirectly.
There are fresh investment plans worth $17 billion ( Rs. 1,02,000 crore) that would generate additional employment for 25 million people by the end of this decade.
Hyundai, Ford and Honda may not reduce production in the immediate future, largely due to substantial export volumes and new vehicle launches. But most other companies are cutting down on production.
Mahindra and Mahindra, which has been hit hard by the increase in excise duties on SUVs in this year’s budget, said there may be substantial lay-offs if demand does not improve soon. “If the current situation continues, we certainly would have to bench a sizeable number of people,” a company spokesperson told HT.
The worst hit so far is the brick-and-mortar automotive component industry that does not enjoy the flexibility or scale of bigger carmakers.