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Automotive Component Sector Sees 1 Lakh Job Cuts As Slowdown Intensifies

Saurav Bhagat by Saurav Bhagat
December 9, 2019
in Automobile, News
3 min read
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  • The industry’s turnover in the April-September period fell to Rs 1.8 lakh crore.
  • The slowdown also resulted in up to $2 billion in investment loss over the period.
  • The last time the automotive components industry saw a slump in turnover was in 2013-14 when it dropped by 2 percent.

The turnover of the automotive component industry experienced the worst ever decline in the first half of the current fiscal cycle leading to a job loss of about 1 lakh of temporary workers until July this year, ACMA said on Friday amid the current economic slowdown.

The industry’s turnover in the April-September period fell to Rs 1.8 lakh crore, down 10.1 percent from nearly Rs 2 lakh crore in the year-ago period, said the Automotive Component Manufacturers Association (ACMA).

The industry body said the slowdown also resulted in up to $2 billion in investment loss over the period. Exports, however, reported a modest 2.7 percent increase over the period to Rs 51,397 crore ($7.5 billion), while aftermarket segment increased by 4 percent to Rs 35,096 crore ($5.1 billion). Imports of components fell to Rs 57,574 crore ($8.4 billion) by 6.7 percent, ACMA said.

A prolonged slowdown is being faced by the automotive industry. For the last year, vehicle sales in all segments continued to plummet, “ACMA President Deepak Jain told reporters.

Given that the automotive component industry is growing on the back of the vehicle industry, the component segment has been adversely affected by a current 15-20 percent fall in vehicle production, he added.

The last time the automotive components industry saw a slump in turnover was in 2013-14 when it dropped by 2 percent, ACMA said.

On job losses, Jain said the downsizing took place from last October to July 2019.

First of all, it’s the temporary employees who lost jobs over the time,” Jain said, adding that was due to component manufacturers adjusting production to demand.

On the BS-VI transition alone, Jain said the automotive industry as a whole has spent about Rs 80,000-90,000 crore, out of which the component industry has put Rs 30,000-35,000 crore.  In pursuit of government assistance to develop the automotive component industry, Jain said one of the industry’s key demand is a uniform 18 percent GST across the automotive components.

“Actually, 60% of auto parts are taxed at 18% while the remaining 40% at 28%. This has led to the proliferation of grey aftermarket operations,” he said. Jain added that a consistent 18% rate would ensure better enforcement and a higher tax base.

He said an increase of 10 percent would have added revenue of $6 billion, for which the corresponding investment could have been around $2 billion. “This would, therefore, be around $1.5-2 billion in investment loss due to the downturn,” he said. He said the capacity utilization of the components industry has now fallen to 50 percent from around 80 percent at the height of production. ACMA said subdued demand for vehicles, recent investments made for BS-VI migration from BS-IV, liquidity crunch, lack of clarity on vehicle electrification policy, among others, had a negative impact on component sector expansion plans.

Plight of Automobile Majors – What’s The Solution?

Tags: Automobile IndustryAutomobile SectorEconomic Slowdown
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Saurav Bhagat

Saurav Bhagat

Saurav Bhagat is an experienced digital marketer and SEO Trainer from New Delhi, India. Saurav is inclined towards brands and brand story-telling from the past half a decade. His interest in startups has made him an immense member of the NBB Family from its very early days. Saurav loves Chai and writes his day to day experiences on Quora and Yuvagasm Media too. He believes in the power of storytelling for a Brand and also in general. He often says- "Stories are powerful enough to build and erase empires and generations!"

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