Auto sales slump triggers worst-ever job cut, figure pegged at 3.5 lakh

A slump in sales has triggered a massive job cut in the auto sector, with many companies forced to shut down factories for days and axe shifts. The cull has been so extensive that initial estimates suggest that automakers, parts manufacturers and dealers have laid off about 3,50,000 workers since April.

Within this previously unreported figure, car and motorcycle makers have laid off 15,000 and component manufacturers 1,00,000, with the remaining job losses at dealers, many of which have closed.

At least five companies have been identified that have recently cut or plan to cut hundreds of jobs, mainly from their temporary labour force.

The downturn – regarded by industry executives as the worst suffered by the auto industry – is posing a big challenge for Prime Minister Narendra Modi’s government.

To revive the sector, auto executives plan to demand tax cuts and easier access to financing for both dealers and consumers at a meeting with officials from the finance ministry scheduled for Wednesday, it is learnt. The industry’s plight was highlighted by the Automotive Component Manufactures Association of India (ACMA), with the trade body’s director general, Vinnie Mehta, saying the sector was experiencing a “recessionary phase”.

Passenger vehicle sales have dropped for nine straight months through July, with some automakers suffering year-on-year declines of more than 30 per cent in recent months.

The fallout from the auto slump could be huge. The sector employs more than 3.5 crore people directly and indirectly, accounting for nearly half of manufacturing output.

Jobless rate rose to 7.51 per cent in July 2019 from 5.66 per cent a year earlier, according to private data group CMIE.

At least 7 per cent of temporary workers employed by 15 automakers have lost their jobs in recent months, said Vishnu Mathur, director general at the Society of Indian Automobile Manufacturers (SIAM).

Maruti Suzuki, country’s biggest carmaker, cut its temporary workforce by 6 per cent over the past six months and there is little sign of a revival.

Tata Motors has had week-long shutdowns at four of its plants in the past two weeks, while Mahindra has said it had 5-13 days without production at various plants between April and June.

Honda stopped production of some car models at its plant in Rajasthan since July 16 and is halting manufacturing entirely at its second plant in Greater Noida for 15 days from July 26, two sources said. The company’s domestic business said that production management will be critical throughout the year and it is seeking to avoid stock build-up.

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