As things turn from bad to worse, sales-wise, in the automobile industry, the dealerships across the country are facing the brunt ahead of the auto component makers and OEMs. The prevailing sales slowdown has put several automotive dealerships in a severe cash crunch, prompting them to shut down or cut jobs.
According to Federation of Automobile Dealers Association (FADA), in the last 3 months alone, around 2 lakh jobs were lost across the automobile dealerships in the country. This figure is over and above the 32,000 jobs lost when 286 dealerships closed down in a 18-month period that ended on April 2019.
FADA fears that if the current situation continues, more jobs will be lost due to increasing dealership shut downs. The industry body urges the government to intervene immediately to save the plummeting auto industry.
Speaking to PTI, Ashish Harsharaj Kale, president, FADA, stated that the job cuts started in May 2019 and so far, front-end sales jobs were the most affected. He added that if things don’t improve, the job cuts will also start affecting the technical jobs as low sales would affect the number of cars coming in for service. When asked about the job cuts, he estimated that FADA members have cut about 7-8% of their workforce in most dealerships due to slump in sales.
To offer a perspective, India has around 26,000 automobile showrooms which are run by around 15,000 dealers. The entire dealership ecosystem accounts for around 2.5 million direct employment and another 2.5 million indirect employment.
The dealers have started closing the satellite outlets that were established with a aim of improving the geographical reach. Ashish said that the primary reason for dealerships not having the buffer to withstand the current slow down is consistent shrinking of margins over the years. So, when the first quarter sales results proved that the degrowth is here to stay longer, dealerships had no choice other than to cut jobs in a bid to avoid loss.
He also added that cutting manpower is the last resort that any dealership would take. In the first 3 months of this year, the dealerships battled the slowdown by cutting down on the stock (with support of OEMs) and lowering several variable costs but unfortunately, things didn’t stop there.
