The automobile sector in India is facing one of its biggest slumps this year. Approximately two lakh jobs have been cut across automobile dealerships in India in the last three months as vehicle retailers take to reducing manpower to tide over the impact of the sales slump, as per the industry body, the Federation of Automobile Dealers Associations (FADA).
FADA added that with no immediate signs of recovery, the job cuts may continue with more showrooms being shut in the near future. The body has south immediate government intervention such as reduction of GST to provide relief to the auto industry.
FADA President Ashish Harsharaj Kale told PTI, “The majority of job cuts have happened in the last three months. It started around May and continued through June and July. 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.”
As per Kale, around 2.5 million people were employed directly through around 26,000 automobile showrooms operated by 15,000 dealers. Another 2.5 million are indirectly employed in the dealership ecosystem.
He added that the two lakh jobs cuts in the last three months are over and above the 32,000 people who lost employment when 286 showrooms were closed across 271 cities in the 18-month period ended April this year.
Elaborating on the reason behind the close of dealerships, Kale said that the 'margin of error' in the business in the past few years has really gone down with the cost almost doubling in the last three to four years. To avoid losses, dealers had been cutting down on costs other than manpower till March. However, the slowdown continued despite good election results and the Budget, which has led to dealers cutting manpower.
As per Society of Indian Automobile Manufacturers (SIAM) figures, vehicle wholesale across all categories declined by 12.35 percent to 60,85,406 units in April-June as compared to 69,42,742 units in the same period of last year. Meanwhile, as per data based on registrations collated by FADA, automobile retail sales in the April-June period declined by 6 percent to 51,16,718 units in the first quarter of this fiscal as against 54,42,317 units in the year-ago period. No wonder, market leader Maruti Suzuki has also trimmed its temporary workforce by 6% this year.