The Indian automotive industry is witnessing in what could be perhaps the most vicious slump in two decades. It is an industry which contributes to almost 49 per cent to the manufacturing GDP of the country and employs close to 37 million people directly and indirectly. But the economic downturn that the industry is facing has bigger implications than just falling sales numbers. Ram Venkataramani, President- Automobile Component Manufacturer Association (ACMA) said last month that if the slowdown continues, 10 lakh jobs throughout the auto and its ancillary industries are at risk. The Society of Indian Automobile Manufacturers (SIAM) estimates that automotive dealerships across the country have already begun facing the heat, with two lakh people already out of jobs. About 1 lakh people have lost jobs from component manufacturers and 15,000 people have lost their jobs from the car and two-wheeler manufacturing industry. Overall, 3.5 lakh people have already lost their jobs in the auto industry since April 2019. Even India's largest carmaker- Maruti Suzuki had to lay off about 6 per cent of its workforce while Nissan India recently let go 1,710 employees in India.
Recently, a delegation from SIAM met N Sitharaman, India's Finance Minister, highlighting the problems which are plaguing the auto industry and one of the the outcomes of the meeting is that the government is looking to work on a stimulus package, which includes a temporary reduction on GST, a fully working scrappage policy and involving Non-Banking Financial Corporations (NBFCs) in a bid to revive sales and get the industry kicking. SIAM said that the revival package will not be segment specific and will be more of a comprehensive plan for the industry in general. But so far, there is no specific timeline on the deployment of the revival package and industry personnel are unwilling to comment on when things will start looking up for the auto industry.
The slowdown comes at a time when the industry is gearing up to meet the upcoming Bharat Stage 6 emission norms along with updated safety norms. Carmakers and component makers have together invested about ₹ 80,000 crore for the BS6 transition and if the sales don't pick up, the industry may find it difficult to recover the invested capital. As an end result, carmakers may consider increasing prices in a bid to sustain margins which could make the situation even worse, given that the consumer sentiments are already down.