Indian Auto industry crisis could lead to one million job cuts, says ACMA

The current 15 to 20 per cent cut in vehicle production in India has led to a crisis like situation in the auto component sector. If the trend continues, an estimated ten-lakh people could be laid-off, says Automotive Component Manufacturers Association of India (ACMA). The association has recently announced the findings of its Industry Performance Review for fiscal 2018-19. The automotive component industry that contributes 2.3 per cent to India’s GDP, 25 per cent to its manufacturing GDP and provides employment to 50 lakh people, stood at Rs.3.95 lakh crore (USD 57 billion) for the period April 2018 to March 2019, registering a growth of 14.5 per cent over the previous year.

Vinnie Mehta, Director General, ACMA said, “ The first half of the fiscal 2018-19 witnessed a robust double-digit growth, however, the second-half saw a significant slump in vehicles sales. The component industry, in tandem, posted a some-what subdued performance with growth of 14.5 per cent over the previous fiscal, registering a turnover of Rs. 3,95,902 crore (USD 57 billion). Auto Component exports grew by 17.1 per cent in FY 2018-19 to Rs.106,048 crore (USD 15.16 billion)”.

Ram Venkataramani, President, ACMA said, “The automotive industry is facing an unprecedented slowdown. The vehicle sales in all segments have continued to plummet for the last several months. Considering the auto component industry grows on the back of the vehicle industry, a current 15 to 20 per cent cut in vehicle production has led to a crisis like situation in the auto component sector. If the trend continues, an estimated ten-lakh people could be laid-off.”

The subdued demand, recent investments made for transition from BSIV to BS-VI, lack of clarity on policy for electrification of vehicles, especially for two and three-wheelers, has left the industry unsure of its future and has caused it to stop all future investments.

“The industry needs urgent Government intervention. There is an immediate need to stimulate vehicle demand and also sustain it post BS-VI implementation, as vehicles will become significantly expensive thereafter. We strongly recommend that the government instates 18 percent GST rate across the entire auto and auto component sector,” Ram added,

On the need for a stable policy for electric mobility Ram said, “As we prepare for the introduction of electric mobility in the country, the FAME 2 scheme and the associated Phased Manufacturing Program (PMP) are indeed welcome steps in this direction and will ensure a successful ‘Make in India’ programme. Any further changes in targets for rollout of electric vehicles would increase India’s import bill and damage the current robust auto components manufacturing ecosystem. This will also result in significant job losses. Therefore, a stable, technology agnostic, e-mobility policy is the need of the hour to ensure a smooth transition and creation of a strong local supply base”.

Key findings

  1. Exports: Exports of auto components grew by 17.1 per cent to Rs 106.048 crore (USD 15.16 billion) from Rs 90,571 crore (USD 13.4 billion) in 2017-18. Europe accounted for 33 per cent of exports followed by North America and Asia, with 29 per cent and 26 per cent respectively.
  2. The key export items included drive transmission & steering, engine components, Body/Chasis, Suspension & Braking etc.
  3. Imports: Imports of auto components increased by 14.4 per cent to Rs.1,23,688 crore (USD 17.6 billion) in 2018-19 from Rs.106,672 crore (USD 15.9 billion) in 2017-18. Asia accounted for 61 per cent of imports followed by Europe and North America, with 29 per cent and 8 per cent respectively.
  4. Aftermarket: With increasing vehicle base in the country, the aftermarket in 2018-19 grew by 9.6 per cent to Rs 67,491 crore (USD 10.1 billion) from Rs.61,601 (USD 9.2 billion) in the previous fiscal.

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