Jharkhand: 700 Auto Subsidiary Companies Shut Down, 30,000 Workers Laid Off After Automobile Sector Slowdown

More than 30,000 workers have been affected after work in 700 micro, small and medium scale industries in Adityapur industrial area, Jamshedpur, was stopped pertaining to a slowdown in the automobile industry. The workers, who have been forced to sit idle for more than a week, now, have appealed to the state government for help.

This industrial area in the state of Jharkhand is the replica of the situation faced by the workers in the automobile industry across India.

Due to prolonged slowdown, the sale of passenger vehicles has slumped down to one of its worst slowdowns in the last 12 months. It started after the ILF&S crisis scrapped demand across automobile segments including consumer durables and packaged goods in September last year.

Around 200 dealer showrooms of passenger vehicles, leading to job losses of around 25,000 people, have been shut down in the last one year, according to estimates by Federation of Automobile Dealers Association (Fada).

Ram Venkataramani, president of the Automotive Component Manufacturers Association of India (ACMA), has said, “If the trend continues, an estimated 1 million people could be laid-off.”

Slowdown In Automobile Industry

Vehicle sales of Maruti Suzuki India Ltd, India’s largest carmaker, fell by more than 19% to 374,481 units in the June quarter. It was the sharpest drop Maruti has witnessed since the third quarter of 2000-01. The company’s net profit for the three months that ended on June 30, witnessed the steepest decline in the last five years after it fell 27% as compared to last year’s net profit of ₹1,435.5 crore.

According to the observers, Maruti shares have been hit due to worries of future growth amid changing government rules and demand squeeze.

The falling share in the automobile industry is unlikely to get better any time soon. “Demand for mass-market passenger cars is unlikely to improve in the near future and that is why the stock price is at its worst possible scenario,” told an analyst with a foreign brokerage to Livemint.

“We understand the sector is amidst a slowdown, though we were left surprised by lack of any growth guidance from MSIL considering that the festive season is near,” said analysts at ICICI Securities.

On July 28, Tata Motors, one of the largest automotive manufacturer in India, was trading at it lowest level since September 13, 2011, due to challenges faced in Jaguar Land Rover (JLR) business and the ongoing slowdown in the domestic operations.

In June quarter, Tata Motors posted a huge loss of Rs 3,698 crore. However, it bounced back after the shares of Tata Motors rebounded nearly 3 percent intraday on July 26.

Tata Motors chief financial officer P.B. Balaji stating that the first quarter saw stress in liquidity and financing for commercial vehicle and passenger vehicle businesses, told Mint that the things are becoming stable now.

“We have been correcting inventory, working on dealer profitability and focusing on retail growth on the back of new product launches. All these fundamental interventions made by us is resulting in turning the China business stable,” he said.

However, the analysts have said that this increase does not negate future implications due to the ongoing slowdown in the automobile industry.

Bajaj Auto Chairman Lashes Out At Government

“The auto industry is going through a very difficult period. Cars, commercial vehicles, and two-wheelers are going through a rough patch,” said Bajaj Auto Chairman Rahul Bajaj, at the 12th annual general meeting (AGM), on July 26.

Bajaj criticised the government for being in denial of growth prospects and asked the government how it is planning to bring about growth. “There is no demand and no private investment, so where will growth come from? It doesn’t fall from heavens,” he said.

“The government may or may not be saying this but there are clear-cut markings from the International Monetary Fund (IMF) and the World Bank, which shows a decrease in growth in the last three-to-four years. Like any government, they would like to show a happy face, but reality is reality,” added Bajaj.

Also Read: Automobile Sales Dropped By 16%, Car Companies To Cut Down Production; Economists Say Worrying Sign