India’s auto parts makers warn of 1 million job cuts if slowdown continues

The slump has prompted automakers to cut production and automakers and parts makers to cut jobs – causing a massive slowdown of growth and sales

India’s auto parts industry could be forced to slash a fifth of its 5 million or so workforce if the slowdown in vehicle sales continues, the president of the country’s largest industry group for auto parts makers said.

The country is facing its worst slump in automobile sales as the overall passenger vehicle sales fell 18.4 percent in the first quarter, while the monthly passenger vehicle sales in June fell by the biggest margin in 18 years.

The sales decline and an erratic purchase sentiment has caused a deteriorating purchase ration which in turn has prompted automakers to cut production and the entire automaker and parts maker industry to cut jobs.

The drop in production “has led to a crisis like situation in the auto component sector,” Ram Venkataramani, president of the Automotive Component Manufacturers Association of India (ACMA), said in a statement late on July 24. “If the trend continues, an estimated 1 million people could be laid-off.” The lay-offs would proliferate, starting from the manufacturing floor to the marketing and tertiary services wing in the industry.

The slump in the auto sector, which accounts for nearly half of India’s manufacturing output, has been a major factor behind the slide in economic growth to a five-year low earlier this year. Furthermore, the auto sector’s slump also causes a ripple effect to other associated industries, like Tyre industry, and the smaller spare parts industry.

Venkataramani said investments in the auto sector have been frozen due to a lack of government clarity on its electric vehicles (EVs) policy. He said a government plan to speed up the rollout of EVs would raise India’s import bill and damage prospects for auto components manufacturers.

He also called for a cut in the goods and services tax for the vehicles and auto component sector.