NEW DELHI : Maruti Suzuki India Ltd said on Tuesday that it has not renewed the job contracts of around 3,000 temporary workers in recent months amid a sharp slowdown in sales, though permanent workers have remained untouched by the manpower restructuring exercise.
R.C. Bhargava, chairman of India’s largest carmaker, is hopeful automobile demand will rebound following a series of steps announced by the government.
Contractual workers give flexibility to the operations of the company, Bhargava said at Maruti’s annual general meeting.
India’s automotive sector is in the midst of an unprecedented slowdown, with passenger vehicle sales falling the most in nearly 19 years in July. This underscores weak consumer sentiment, uncertain economic conditions, higher ownership costs, farm distress and a credit squeeze. This was the ninth straight drop in passenger vehicle sales.
Sales of commercial vehicles as well as two-wheelers have also remained weak, forcing automakers across segments to lay off workers and temporarily suspend production to keep costs in check.
Bhargava said Maruti has no plan to fire any of its 16,050 strong permanent workforce in the near future. He said steps announced by finance minister Nirmala Sitharaman on Friday to boost the economy will go a long way in reviving demand in the domestic market.
“Some of the measures announced by the government are very good and faster availability of GST (goods and services tax) refunds will fuel further growth. Also, the assurance from government that bankers will not attract punitive measures for bona fide commercial decisions will help," Bhargava said in response to a shareholder’s query.
Last week, Sitharaman announced a slew of steps such as mandating government agencies and departments to replace older vehicles, increasing depreciation on new vehicles for commercial fleet service providers, urging banks to make automobile loans cheaper and increase credit availability for non-banking financial companies.
The finance minister also assured buyers and manufacturers that vehicles compliant with Bharat Stage (BS) IV emission norms registered before 31 March 2020 will be able to run for the entire registration period or the life of the vehicle. India will shift to BS VI norms from 1 April. Automakers have also been urging the government to reduce the GST rate on vehicles to 18% from 28%.
“Unfortunately, what has happened in the last few months is that suddenly a number of factors have combined to increase the final cost the customer has to bear to buy a car," Bhargava said. “The new safety regulations, which include airbags, ABS (anti-lock braking system) and more stringent crash test norms have been implemented in the current financial year."
Meanwhile, in line with the Centre’s approach to promote electric mobility, the Suzuki Motor Corp. unit has begun testing its first electric vehicle based on the Wagon R hatchback model. Maruti will, however, continue to invest in developing vehicles equipped with compressed natural gas (CNG) and hybrid powertrains until electric vehicles become affordable.
The recent start of supply of the Baleno hatchback to Toyota’s Indian unit as part of a cross-badging agreement has also helped maintain decent utilization levels in the manufacturing capacities of Maruti Suzuki, at a time of weak demand.
“The advancement of electric technology is not as rapid as we hoped and what this seems to indicate is that for an individual customer or a low-cost car user, availability of an affordable electric vehicle is not likely in the next few years. That is unfortunately the reality of this situation," Bhargava said. “Meanwhile CNG and hybrid cars are the way forward."
