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Car, bike sales decline results in loss of 10 lakh jobs from auto component industry

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Dealer inventories are at an all time high. Image for reference.

The slowdown across the auto industry has had a catastrophic impact on the auto component industry. This is the tenth consecutive month of prolonged slowdown across the auto industry which started in September 2018 and there seems to be no respite in sight.

This negative impact has been particularly more so across the automobile component manufacturing sector which has seen a 10-15 percent loss in employment resulting in 8-10 lakh job cuts, reports Times of India. This is particular so in the automobile manufacturing regions of Pune, Chennai, Nasik, Uttrakhand and Jamshedpur and a situation such as this has never been seen in the past.

Leading auto parts supplier, Bosch has shut down its factories for 5 days in a row. Total growth in the component manufacturing sector slowed down to 14.5 percent to 3,95,902 crores in FY19 while in FY18 the revenue from this sector grew by 18.3 percent to 3,45,635 crores as per data released by Automotive Component Manufacturers Association of India (ACMA).

Image – Times of India

Statistics also reveal that in the first half of the year, there was 40-50 percent growth in revenues while post September 2018 revenue growth translates to 35-40 percent. This slowdown comes at a time when there is a transition to BS VI emission standards and a movement towards electric mobility.

Vehicle sales in domestic markets have also suffered over the past 10 months which all leading automakers resorting to double digit production shut down adversely affecting component manufacturers. Exports have also dipped 17.1 percent in the past fiscal to Rs.1,06,048 crores as compared to growth of 23.9 percent in FY18.

Along with the general slowdown, the auto industry also has to contend with 18 percent GST rate. Under this GST regime, around 70 percent of auto components come under this 18 percent slab while 30 percent remains in the 28 percent bracket. Automobiles also attract 28 percent GST with additional cess ranging from 1-15 percent depending on length, engine type, and size.

The slowdown is further compounded by a transition to BS VI emission standards while the lack of clarity on the future of electric vehicle policy has also left many automakers in a quandary on whether to fuel in more investments into the electric vehicle segment or not.

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