Demand truncation dents workforce in Gurugram-Manesar auto cluster

A massive slowdown led by truncating demand has forced the entire value-chain operators across the automobile industry to reduce production levels and downsize workforce to tide over lean times.

Specifically, the slowdown has impacted the employment prospects in the auto cluster of Gurugram-Manesar, home to automobile majors such as Maruti Suzuki, Hero MotoCorp and Honda Motocycle & Scooter India.

At present, the automobile industry has been dented the hardest by the slowdown which is a culmination of several factors like high GST rates, farm distress, stagnant wages and liquidity constraints.

Besides, inventory pile-up at the dealership level and stock management of unsold BS IV vehicles have become a problem for the sector.

The sales downturn assumes significance as the auto industry contributes to around half of manufacturing GDP and 11 per cent of the total GST revenues. It is estimated that the sector also supports almost 37 million direct and indirect jobs.

Industry insiders at the auto cluster said that around 50,000 to 1 lakh temporary employees across the entire value-chain, including those from ancillary industries, logistics and raw material suppliers, have been sent on unpaid leave or have been sacked.

However, no authentic data is currently available on the extent of job losses, as most of these have occurred on the auto part suppliers' side.

"Across the industry, various estimates show that over a lakh or more employees have been either asked to go on an unpaid leave or have simply been fired," Kuldeep Janghu, General Secretary of Maruti Udyog Kamgar Union, told IANS in Gurugram.

"The majority of those who have been impacted were employed on a temporary basis. These estimates include employees who worked for vendors, suppliers, transporters and manufacturers of auto parts."

However, sales revival due to the upcoming festive season might aide the industry to temporarily buck the downsizing trend.

"Till about a month back, around 700 temporary employees were sent on unpaid leave for a month or so. After a month, they were reinstated and another 700 were asked to go on leave," Suresh Gaur, President, HMSI Employees Labour Union, told IANS in Manesar.

"However, with the forthcoming festival season and an expected pick-up in sales, everyone has been taken back. But the company has increased holidays per week."

According to Rajesh Shukla, General Secretary of Hero MotoCorp Workers Union, the sudden collapse of several non-banking financial companies, which used to be a major source of lending for automobile purchases, along with high GST rate has led to sales downturn.

"Effectively, everyone in the sector, from sub-vendors, vendors to OEMs, have been impacted badly by the slowdown due to the higher initial purchase cost," Shukla said.

"High tax rate, expensive raw materials and additional up front costs on insurance and new safety features have subdued the market. This has directly impacted employment opportunities."

Shukla added that the introduction of BS-VI vehicles from next year will drive up cost and worsen the existing situation.

Recently, all major OEMs consisting of passenger, commercial, two and three-wheeler manufacturers have reported a massive decline in domestic sales.

Figures from the Society of Indian Automobile Manufacturers (SIAM) showed that domestic passenger car sales in June went down by 24.07 per cent to 139,628 units. The July figures are awaited.

In the commercial vehicle segment, domestic sales were down by 12.27 per cent to 70,771 units in June.

The overall sales of two-wheelers, which include scooters, motorcycles and mopeds, edged lower by 11.69 per cent to 1,649,477 units.

In all, the total sales of the Indian automobile sector declined by 12.34 per cent during June 2019 to 1,997,952 units across segments and categories.

Consequently, sales slowdown led to curtailment of manufacturing with the domestic passenger cars' production coming down by 22.26 per cent to 169,594 units from 218,167 units.

Similarly, the commercial vehicle production was down by 23.39 per cent to 69,496 units last month. Overall production of two-wheelers edged lower by 11.70 per cent to 1,915,195 units.

The total production of the Indian automobile sector declined by 12.98 per cent during June 2019 to 2,336,138 units across segments and categories.