The industry body mentioned that auto component manufacturers would be forced to reduce the workforce in an attempt to survive due to silenced demands and existing overcapacity.
India’s auto components sector is likely to see massive job cuts if the sector continues to face trade difficulties due to lower demand due to the coronavirus pandemic. According to a report in PTI, the Automotive Component Manufacturers Association of India (ACMA) stated that the sector could witness huge job losses due to lack of demand caused by the pandemic. The industry body mentioned that auto component manufacturers would be forced to cut back on the workforce in a bid to survive due to muted demands and overcapacity. In addition, SIAM has already forecast an annual decline of 35 to 40 percent due to the COVID-19 crisis.
President of the Automotive Component Manufacturers Association of India (ACMA), Deepak Jain, said: “Until demand returns, there will be concerns about financial stress, job loss and liquidity management. These concerns will remain and alone they will disappear when we return to normal. Even “If companies resume their work entirely, they will not require as much workforce due to low market demand,” he said. So in such a scenario, even if we don’t like it, there would be losses of jobs, temporary labor right now, but if demand doesn’t increase, it could be others as well. ”
In particular, the domestic auto components sector employs approximately 50 lakh people, which has seen a decrease of 18 percent last year. And, the same is expected to contract between 20% and 40%. Speaking about the plan to reduce investments due to the current situation, Jain said: “There is overcapacity and therefore there is no point in expanding capabilities at this time.”
In addition to aviation and hospitality, the automotive components space is among the top five stressed sectors in the country right now. The sector was already experiencing a 15-month slowdown when the coronavirus outbreak hit the sector. In addition, he mentioned that priority loans for auto loans and car dealers and service stations could be effective in increasing demand and should be included in the MSME Law.
ACMA has around 850 member companies that contribute more than 90 percent of industry turnover in the organized sector. Furthermore, the turnover of the auto components sector is currently around USD 57 billion, representing around 2.3 percent of India’s GDP.