India's Auto Market Crashes: 200,000 Job Losses In 3 Months, One Million At Risk

A downturn in the Indian automobile industry has led dealerships to cut at least 200,000 jobs in the last three months amid an unprecedented sales decline, reported India Today.

The Federation of Automobile Dealers Associations (FADA) warned that the automobile downturn would continue to cycle down through 2H19, leading to more job losses with dealerships and across the entire industry.

"The majority of job cuts have happened in the last three months...It started around May and continued through June and July," FADA President Ashish Harsharaj Kale told Press Trust of India.

Kale said, "Right now most of the cuts which 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, so it is a cycle."

When asked about job losses, he said, "Close to about two lakh [200,000]."

"It is a guesstimate that our members have already cut 7-8% of the jobs in most of the dealerships as the degrowth has been very high," he added.

Around 2.5 million Indians were employed directly through 26,000 automobile showrooms operated by 15,000 dealers. Dealerships indirectly employ another 2.5 million, he added.

The 200,000 job cuts in the last three months exceeded the 32,000 layoffs when 286 dealerships closed across the country in the 18 months ended April this year, he said. Job losses in the auto industry point to an Indian economy that is quickly deteriorating through summer.

Figures from the Society of Indian Automobile Manufacturers (SIAM) show vehicle wholesales plunged by 12.35% to 6,085,406 units in April-June versus 6,942,742 units in the same period last year.

Automakers such as Maruti Suzuki Ltd, Tata Motors Ltd, Mahindra & Mahindra Ltd (M&M), Ashok Leyland Ltd and Honda Motorcycle & Scooter India Ltd have closed manufacturing facilities in the last month as demand for vehicles comes to a screeching halt.

July figures show passenger car sales crashed by 29%, making it the worst month for the automobile industry in two decades.

Automakers aren't alone. Auto part makers in India such as Exide Industries, Continental Automotive Components (India), ZF, Brose India Automotive Systems, Schaeffler India, Brembo Brakes India, Kalyani Maxion Wheels, Varroc Group, Eaton, IAC India have adjusted production to slowing conditions or closed facilities to avoid a dangerous inventory build-up.

Last month, Bosch Ltd, the largest parts maker in India, published a memo that outlined how it suspended operations at its Gangaikondan plant in Tamil Nadu for a week in late July to "avoid unnecessary build-up of inventory." 

Ram Venkataramani, President, Automotive Component Manufacturers Association of India (ACMA), said the 15% to 20% cut in auto production had triggered an auto crisis in India, could lead to at least one million people being laid off.

The current slowdown in the India economy is cyclical and isn't expected to turn back up for the next several years. Industrials have been the first domino to fall, and next will be Indian consumers.