Managing Director of Mahindra & Mahindra (M&M), Pawan Goenka commenting on the situation of poor auto sales leading to thousands job said that next fear is of suppliers and dealers going bankrupt if the this continues and the upcoming festival season turns out to be slow in terms of demands.
“If we miss this festive season and don’t see a turnaround, there will be a significant negative effect in terms of jobs, investments, and bankruptcy. Many suppliers may have to declare bankruptcy because not everybody has the deep pockets to stand a long slowdown like this,” Goenka said, adding there have already been 12 months of slowdown which is very long.
These comments came after the shutdown of more than 300 dealerships in the last 12 months which resulted in the loss of around 2 lakh jobs, according to the Federation of Automobile Dealers Association. As per the stats of Society of Indian Automobile Association, close to 15,000 people have lost jobs in this sector in the last 3 months.
Goenka also said that they had to let go fo around 1,500 workers since April. He warns of more job cuts in the upcoming future. He also said they are not trying to remove anyone but if the slowdown continues, they will be left with no other option
There will be more job losses in the suppliers and dealers fraternity.
Goenka said,” I am more concerned about suppliers and dealers, and less about OEMs (Original Equipment Manufactures) because OEMs can withstand the slowdown longer than the suppliers.
M&M is also trimming and halting any further investments due to uncertainty over demands in FY20.
In last one year due to a hike in insurance costs, safety norms related costs and expensive finance options. The cost of ownership is expected to rise further by April 2020, when the new BS-VI emission norms will kick in.
Goenka believes the factors behind the sharp decline in the sales is optimum wholesale and retail financing and an increase in transaction cost. He said,” If I go back to the previous two periods of slowdowns, a fiscal stimulus was given and both times they have worked. A stimulus has to be temporary, just to get the positive momentum back, not necessarily a permanent one,”
Recently, The country’s largest carmaker Maruti Suzuki India Ltd. has reported 37 percent domestic passenger vehicle sales from the last year earlier in July. Second-ranked Hyundai Motor India Ltd. recorded a 10 percent drop while total sales fell 16 percent at Mahindra and Mahindra Ltd. At Toyota Motor Corp. and Honda Motor Co., the sales fell 24 percent and 49 percent respectively in July.
We hope the government comes up with something and help the automobile sector so that the dealers and the companies survive this slowdown of the economy.