Automobile sector crisis sees dealers cut two lakh jobs

With prolonged slowdown in the automobile sector, dealer showrooms across India have cut around 2 lakh jobs in the past three months, said the Federation of Automobile Dealers Associations (FADA). The new number does not include 32,000 people axed when 286 showrooms were closed down across 271 cities in the 18-month period ended April this year.

FADA is of the view that job cuts may continue with more showrooms being shut in the near future as there are no signs of recovery. The association has asked for immediate intervention of the government. In line with the Society of Indian Automobile Manufacturers and the Automotive Component Manufacturers’ Association of India (ACMA), FADA is also seeking reduction in GST rates.

The job cuts come in the wake of ACMA warning of about 10 lakh jobs in danger as sales are down since last year. Component and original equipment manufacturers have already cut down production days as workers are left with no work.

“Right now, most of the cuts that have happened are in front-end sales jobs, but if this (slowdown) continues, then even the technical jobs will be affected because if we are selling less, then we will also service less. It is a cycle,” FADA president Ashish Harsharaj Kale said, adding, “It is a ‘guesstimate’ that our members have already cut 7-8 per cent of the jobs in most of the dealerships as the de-growth has been very high.”

Around 2.5 million people were employed directly through around 26,000 automobile showrooms operated by 15,000 dealers. Another 2.5 million are indirectly employed in the dealership ecosystem.

The April-June quarter also saw passenger vehicle sales registering steepest fall in nearly two decades while decline in overall auto sales was the steepest since the 2008 global economic crisis.

Even in July, demand in the sector continued to remain territory with India’s largest carmaker Maruti Suzuki registering over 36 per cent fall in sales year-on-year. The prolonged economic slowdown raising fears of future cash flow among buyers, tightening of credit rules by financial institutions and poor monsoon were among the factors that dampened the demand.

“We hope, from whatever we hear, that the government has taken note of the serious situation that is going on in the overall economy, specifically with the auto sector. We hope for some support for the auto sector in the next few days or a week or two,” the FADA president said, adding that the auto industry has already put a request for GST cut.

While the revival of monsoon holds out hope, resolution of liquidity crisis, specially with the non-banking financial institutions, will go a long way in helping the auto industry recover from one of the worst sales slumps in its history, said Kale.