Car Manufacturers Halt Production In India Amid Disastrous Slowdown

The India economy is set to deteriorate through 2H19 despite the government's stimulus unveiled last week. A global synchronized slowdown and a negative fiscal impulse have sent the economy into a tailspin. Regional instabilities in Jammu and Kashmir, a currency rout with the rupee plunging underneath 72 against the dollar, and a trade war between the US and China, are other factors that have not helped the situation.

Automotive manufacturing in the country has been one of the hardest-hit sectors. Indian auto sales in July plunged 30.9% to 200,790. It's the ninth consecutive month of declines and the steepest drop in 18 years. The sales declines forced hundreds of thousands of layoffs in the last several months, with many companies forcing to idle factories.

Reuters obtained company notices to employees that showed Japanese carmaker Toyota Motor and South Korea's Hyundai Motor are the latest companies idling factories amid the downturn that could last through 1H20.

Denso Corp's Indian unit, which makes powertrain and air-conditioning systems for cars, laid off 350 temporary workers at its Manesar plant in northern India, a source told Reuters.

Bellsonica, which is owned by Maruti Suzuki, had to idle its fuel tank and brake pad plants this month and lay off several hundred workers in Manesar, two sources said.

Already, the auto sector has cut as many as 350,000 jobs; this includes auto manufacturing, auto parts manufacturing, and dealership jobs.

The downturn in the automobile industry is a significant obstacle for Prime Minister Narendra Modi's government because autos account for 50% of India's manufacturing output.

Automobile companies, directly and indirectly, employ more than 35 million people.

"If this industry goes down, then everything gets hurt. Manufacturing, jobs, and revenue to the government," Vishnu Mathur, director general, SIAM, told Reuters earlier this month.

In another memo viewed by Reuters, Toyota told workers the company would pause production at its plants in Bengaluru in southern India on Aug 16 and 17 "due to low market demand of vehicles."

N. Raja, deputy managing director, at Toyota's Indian unit, told Reuters that its plants would have been idled for at least 16% of the entire month (or about five days) to thwart a rapid build in stocks due to decreasing demand.

"The industry is deeply concerned with the reality of poor customer sentiment faced by the sector," said Raja, adding he expected the government to provide stimulus to the industry.

In another memo viewed by Reuters, Hyundai said it has halt body, paint, engine, and transmission plants for several days this month.

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 in the coming quarters.

The Indian auto crisis - regarded by industry executives as a disastrous downturn that could be one of the worst seen in the country's history.