The overall slowdown in the economy has taken a tremendous toll on the auto industry and auto sales in July have witnessed the biggest slump...
The overall slowdown in the economy has taken a tremendous toll on the auto industry and auto sales in July have witnessed the biggest slump in almost two decades. The downturn has already led to two lakh people losing their jobs and around 10 lakh people are at the risk of losing their jobs. The situation has worried several automakers and the industry body- SIAM (Society of Indian automobile Manufacturers) who recently had words with the Finance Minister demanding immediate action to revive sales. SIAM was assured of the review and finally the government decided to come up with a revival package for the auto sector. The stimulus package will include temporary GST reduction and the government will also form a scrappage policy in a bid to revive sales across the sector. SIAM has also confirmed that the revival package won't be segment specific and will be effective across segments.
Also Read: SIAM Demands Immediate Reduction In GST Rates From Government
The Indian auto industry that generates around 37 million direct and indirect jobs contributes 49 per cent to the overall manufacturing GDP and job losses are the ultimate result of production cuts which have been undertaken by several automakers. India's largest carmaker- Maruti Suzuki has already laid off 6 per cent of its workforce while Nissan India recently let go 1,710 of its employees. Pawan Goenka, Managing Director- Mahindra & Mahindra during the company's Q1 financial results told reporters that he sees an impending danger of job losses across the ailing auto sector. According to a recent NDTV report, the slowdown in auto sector has rendered an estimated three lakh and a fifty thousand people jobless. The auto component industry is facing the biggest threat due to the downturn and has already lost 15,000 jobs. Ram Venkataramani, President- ACMA (Automobile Component Manufacturer Association) also had said in its annual conference last month that if the slowdown continues, an estimated one-million people could be laid off from the entire industry.
Also Read: Auto Sales Hit Rock Bottom: July 2019 Sees The Lowest Sales In 19 Years
The slowdown comes at a time when the industry is gearing up to meet the upcoming emission and safety norms. Carmakers and component makers have together invested about Rs. 80,000 crore for the BS6 transition and if the sales don't pick up, the industry may find it difficult to recover the invested capital. As an end result, carmakers may consider increasing prices in a bid to sustain margins which could make the situation even worse, given that the consumer sentiments are already down. Auto sales in India have been spiraling down since the last three quarters and Passenger vehicle (PV) segment has recorded a sales decline of 30.98 per cent selling 200,790 units as compared to 290,391 units which were sold in the same month last year. The industry had witnessed such a huge sales decline 19 years back in December 2000 when the PV segment recorded a de-growth of 35 per cent.
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