Huge job losses imminent in automotive sector if demand remains weak: ACMA

New Delhi: Auto component sector may see huge job losses if the automotive sector continues to face headwinds due to lack of demand amid coronavirus pandemic, industry body ACMA has said.

With muted demand and excess capacities already in place, the auto component makers would have to cut down on their workforce in order to keep their businesses afloat, the industry body added.

"Till demand is back, there will be concerns about financial stress, job losses and liquidity management. These concerns will remain and only go away when we are back to normal," Automotive Component Manufacturers Association of India (ACMA) President Deepak Jain told PTI.

Even if the companies resume work fully they will not require that much of workforce due to muted demand in the market, he said.

"So, in such a scenario, even if we don't like, there would be job losses. It is temporary workforce right now but if demand doesn't pick up it could be others as well," Jain noted.

He added that the auto industry body SIAM has already predicted an annual downturn of 35-40 per cent due to COVID-19 situation.

"So in that is the case in two years you are reducing 50 per cent and if that is the case, if demand generation does not come through, or there is support on demand generation, then definitely there will be contraction in jobs as well," Jain noted.

The auto component industry, which employs roughly 50 lakh people, declined by 18 per cent last year and this year again expected to contract between 20 per cent to 40 per cent.

"There is excess capacity and hence there is no point in expanding capacities right now," Jain said, when asked if the auto component companies plan to curtail investments due to the current situation.

The auto component industry is one of the top five stressed sectors right now, others being hospitality, aviation etc, he added.

"We were already going through 15 month of  downturn, so when we got into this coronavirus pandemic we were not in the best of financial health," Jain said.

When asked what steps on the part of the government would help bringing sector back on track, he said: "As an auto industry we have been having a long pending demand on rationalisation of GST. We are also hoping that the scrappage policy comes through".

Besides, in order to boost demand, there should be priority lending on auto loans, and auto dealers and service stations should be included under the MSME Act, he added.

Similarly, ACMA Director General Vinnie Mehta said while some of the issues of the MSMEs have been addressed though the recent announcements, the larger enterprises, which create bulk of the employment, continue to face significant working capital crunch.

"It would indeed be a great gesture on part of the government if it could support the industry by paying a certain proportion of wages and salaries of our employees," he added.

Governments across the world, be it Germany, or Japan or the US have supported their industry on this account, Mehta said.

"I fear that with little or no production, the industry would be forced to lay off employees, and with a bleak economic situation, this could lead to social unrest," he added.

ACMA has around 850 companies as members which contribute more than 90 per cent of the industry's turnover in the organised sector.

The turnover of the auto component industry is currently pegged at around USD 57 billion, contributing 2.3 per cent to India's GDP.