Slowdown in auto industry impacts component sector too; 15% job loss after turnover growth dips

The slowdown in the auto industry has a direct impact on the ancillary sector, too.

Since September last year, the auto ancillary sector has registered up to 15 percent loss in jobs due to fall in revenues because of a decline in auto sales for the past ten months, said a report in Mint.

The auto component manufacturing sector reported up to 15 percent job loss close on the heels industry body ACMA expressed fears of losing about 10 lakh jobs in the sector, said a media report.

The report citing ACMA data said the auto component manufacturing companies’ turnover fell 14.5 percent to Rs 3,95,902 crore in FY19 following the slowdown in auto sales. However, in FY18, the revenue of the auto ancillary sector had increased by 18.3 percent to Rs 3,45,635 crore.

On Wednesday, ACMA sought a reduction in Goods and Services Tax (GST) rate to a uniform level of 18 percent for the entire automobile industry to stimulate demand and help save around 10 lakh jobs, which are at risk due to the prolonged slowdown in vehicle sales.

The industry body, which represents the auto components industry that alone employs around 50 lakh people, also sought clarity on policy for electrification of vehicles.

“The automotive industry is facing an unprecedented slowdown. Vehicle sales in all segments have continued to plummet for the last several months,” ACMA president Ram Venkataramani said.

In June, passenger vehicle sales dropped by 17.54 percent to 2,25,732 units in June 2019 from 2,73,748 units in the year-ago period, reported PTI. Similarly, domestic car sales were down 24.97 percent to 1,39,628 units as against 1,83,885 units in June 2018.

“Industry continued to remain stressed. However, the market is expected to bounce back soon,” reported PTI quoting Tata Motors.

On the commercial vehicles (CV) front, domestic sales were at 35,722 units as against 38,560 units in the same month last year, down 7 percent.

“The market continues to exhibit subdued demand sentiment as customers are postponing purchases given the poor freight availability, the falling freight rates affecting their viability,” it said.

The slowing down of the economy is hurting overall customer sentiments and causing an impact on demand for fresh vehicles, the auto major had said.

In April, sales of passenger vehicles dived to 247,541 in April versus 298,504 a year earlier, data released by the Society of Indian Automobile Manufacturers (SIAM) showed. Two-wheeler sales dropped 16.4 percent to about 1.6 million vehicles, said a Reuters report.

Last month, the country’s biggest automaker Maruti Suzuki Ltd said it sold 458,479 vehicles in the three months ended March 31, down 0.7 percent on-year, and forecast a weak rate of growth for the current fiscal year.

— With inputs from agencies