The Indian government may be seeing a five trillion dollar economy ahead, but the things are going otherwise, at least many sectors are loudly stating that. Among them is the Indian automobile industry which witnessing the worst slowdown. The economic downfall of this sector has put a sudden brake on the progress of this industry, and it is a reality that is biting the Indian economy in a bad way. The automobile sector is seeing its worst time in decades, much worse than the time of global recession. Once the Indian automobile industry was flourishing and was making its presence felt in the fourth position of the global automobile industry. But this slowdown is shaking its throne and causing turmoil in the industry.
So what has turned around the fate of this industry, and why have the lines of worry emerged on the foreheads of the automobile companies? Currently, the sales have plunged drastically, which is causing the carmakers to suffer huge losses. Even though they are planning to come up with new models and announced few new launches as well, the loss is overwhelmingly dominating their future plans. Things are going so bad that companies have started to retrench by cutting off labors and temporary workforce. This has triggered a massive loss of jobs in the automobile sector. The situation is indeed scary since India’s biggest automobile giant, Maruti Suzuki India Limited has reduced their workforce by almost 40,000 to 50,000 workers, which include their permanent and contractual labors. This situation is at the Gurgram and Manesar in Haryana, which is the largest automotive hub in India. Similar plight is also faced at auto hubs of Pune and Chennai.
The slowdown is not only affecting the car manufacturing units but also the other industries involved in producing its spares and accessories. It is not just the cars that are affected by this slowdown, but two-wheelers and heavy vehicles are also bearing the brunt of it. Companies like Hero Motor Corp and Ashok Leyland has also started cutting off their costs by declaring no-work days.
Sales figure are very discouraging as the vehicular sales in July dipped by 31 percent to 200,790 vehicles in comparison to the beginning of the year. This is the steepest decline in two decades, which is quite horrendous for the automobile sector. Big brands like Maruti Suzuki suffered 36.7 percent loss in sales in comparison to what it had in 2018. The sales chart nosedived in the SUV section even after the introduction of recent models such as Mahindra XUV300, Hyundai Venue, and MG hector, which were thought to be game-changers for this industry.
Mahindra & Mahindra and Tata Motors are opting for cut down in production to control losses and resorting to no working days like Leyland and Hero Motors. A similar pattern is followed by some other big brands as well for managing their losses. In the recent budget, the government levied excise duty and additional cess on luxury cars and SUVs. This move catapulted their price, making them costlier. Apart from that, no reforms or any tax benefit was announced for the automobile sector to encourage its growth. The government did announce aid for the production of EV vehicles, but that has still a long way to go. The import duty on the several parts that are used in automobiles was also raised in the last budget session, making the cost of car manufacturing surge even more. Other factors like high insurance cost, unstable stock market, and the liquidity squeeze are costing the automobile sector dearly bringing its sales down. Hiring has completely stopped, and the current workforce is also laid off. Automakers are urging the government to make an amendment to the GST pattern or modify its slabs. Removing the extra cess might also help otherwise, things will continue to drift down further.