India's auto parts businesses may axe one million jobs if slowdown continues

AUTO parts businesses in India may be forced to axe one million jobs if a slowdown in vehicle sales continues, the president of Automotive Component Manufacturers Association of India (ACMA) said on late Wednesday (24).

Country’s automotive industry is under a turbulent condition in recent months after vehicle retail sales fell 18.4 per cent in the first quarter, and monthly passenger vehicle sales in June fell by the biggest margin in nearly two decades.

A decline in demand for vehicles amid weak economic growth has prompted the vehicle producers and auto parts makers to reduce production and cut jobs.

Speaking on the need for urgent government intervention to kick-start a long-term growth cycle for the auto and auto component industry, Ram Venkataramani, president, ACMA said: “The automotive industry is facing an unprecedented slowdown. The vehicle sales in all segments have continued to plummet for the last several months.

“Considering the auto component industry grows on the back of the vehicle industry, a current 15 to 20 per cent cut in vehicle production has led to a crisis like situation in the auto component sector. If the trend continues, an estimated ten-lakh people (one million people) could be laid-off.”

Venkataramani noted 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.

“Any further changes in targets for the rollout of electric vehicles would increase India’s import bill and damage the current robust auto components manufacturing ecosystem. This will also result in significant job losses…”.

India’s automotive component industry that contributes 2.3 per cent to country’s GDP, 25 per cent to its manufacturing GDP and provides employment to five million people, stood at $57 billion for the year 2018-19, registering a growth of 14.5 per cent over the previous year.