Slowdown in auto sales: 10-15% people lost jobs in auto component industry

The growth in total turnover of the automobile component manufacturing companies in India slowed down to just 14.5% to 3,95,902 crore in FY19 as a consequence of decline in overall vehicle sales, data released by the Automotive Component Manufacturers Association of India (ACMA) showed. In FY18, the revenue of the sector grew by 18.3% to ₹3,45,635 crore.

According to Ram Venkatramani, president, ACMA, if one looks at the numbers in the first half there was 40-50% growth in revenues till September and ever since there there has been a huge slowdown. This is the tenth month of the prolonged slowdown and a revenue growth of just 14% in the top line can translate into 35-40% in the bottom-line.

“The sense what I get from talking to our members that there has been job losses of around 10-15% in the last ten months though there is no official number that I can give. Whenever the there is production cut of 20% by OEMs then there is job losses across the value chain of component manufacturers," said Ram Venkatramani, president ACMA.

The vehicle sales in the domestic market have been on a continuous decline in the last ten months, as leading vehicle manufacturers have resorted to double digit production shutdown which has adversely impacted fortunes of the component manufacturers.

The automotive component industry exports 26% of its total production and growth in revenues from exports also slowed down to 17.1% last fiscal year to ₹1,06,048 crore in aft 19 compared to a growth of 23.9% to 90,571 crore in FY18.

Engines components and drive transmission systems formed 25.9% and 13.3% of the total revenues generated by the sector, respectively. This indicated the possible loss of revenue and employment, if the government asks the auto industry to shift abruptly to electric vehicles.

“About the 70% of our employment is contractual basis. So when there is a ramp up the manufacturers hire more and when there is production cut of 20% job losses will be around the same region. I have never seen component manufacturers maintain production shutdown before," said Vinnie Mehta, director general, ACMA

“In the commercial vehicle segment the slowdown is genuine and is not inventory correction strategy by companies. The revised truck axle norms and lack of finance options have hurt the manufacturers," added Venkatramani.