Automakers warn of job losses as car sales drop 25% in June

The passenger vehicle sales in the automobile sector declined 18% in June, for a straight eighth month, as the industry association SIAM warned of job losses in the sector, which employs about 37 million people, if the current situation continues.

The government needs to take concrete measures to help arrest the decline and spur demand, SIAM said while releasing sales numbers.

In June, PV sales declined by 17.54% to 2,25,732 units from 2,73,748 units in the same period a year ago, while domestic car sales were down 24.97% to 1,39,628 units in June as against 1,83,885 units in June 2018, according to data released by the Society of Indian Automobile Manufacturers (SIAM) on Wednesday.

All vehicle categories registered a decline in sales in June. Barring October last year, when PV sales were up 1.55%, sales fell in 11 of the last 12 months.

"This is the worst phase of the industry. We have not seen such kind of a prolonged slowdown ever. There have been patches of de-growth earlier, but that lasted for one or two quarters at most. Nothing like this has happened before," SIAM president Rajan Wadhera said.

The passenger car production stood at 1,69,594 units last month, the lowest in 71 months. It is worst since June 2013, when car production had dropped to 1,64,631 units, according to SIAM.

For the first quarter April-June, PV sales declined 18.42% to 7,12,620 units compared with 8,73,490 units in the first quarter previous year. Vehicle sales across all categories declined by 12.35% to 60,85,406 units during April-June 2019 as against 69,42,742 units in the same period last year.

The industry doesn't see this improving "as it is linked to the overall GDP figures… the economic survey is talking of the last quarter of 5.8% growth," Wadhera said.

"If the de-growth continues, it is bad for everyone and the industry will need to take critical measures to stay afloat and conserve resources.…in the short term if we don't arrest it (the decline), the de-growth will continue. It is already affecting us financially... if we have no work, then there will be no new jobs and the current jobs will also start going down," he said.

SIAM expressed disappointment that industry's concerns were not addressed in the Budget 2019, mainly the reduction in goods and services tax from 28% to 18%. The lowering of tax could have been the biggest enabler to put the industry back on a growth path, he said.

When asked if there have been any job cuts over the past year, he said, "I don't think that phase has started, but we are very close into that. We can't survive at this moment. As SIAM we support the electric vehicle plan of the government, but at the same time, we must survive during that plan."

Ashish Modani, vice-president and co-head, corporate ratings, Icra, "Consumer sentiments remain sheepish, which continues to weigh on demand for discretionary items like cars. Moreover, inventory rationalisation at PV dealerships has taken a toll on wholesale dispatches. The wholesale dispatches are likely to remain weak for the next 1-2 months and we expect some signs of recovery from the festive season."

"Given the government's fiscal position, we have not expected any GST cut on the automobile industry. Government's push to recapitalise banks and improve liquidity in NBFCs is positive for the economy, the benefits of which will start reflecting in the next few quarters," Mohani said.

SIAM said the pressure of meeting regulations has also driven up the costs for the industry which has complied with more regulations in the last two years than in the last decade."… Reduction in the GST, which unfortunately has not happened, would have been the biggest enabler to start the demand… We have been making the presentation to the government saying that... this de-growth affects the GST revenues as well. If we de-grow by 20%, the overall GST also is less by 20%. We are really very concerned. We need very concrete measures," he said.

The industry is investing around Rs 80,000 crore on upgrading products to conform to BS-VI emission norms and is also seeking availability of BS-VI oil from February itself to synchronise the sale of BS-VI vehicles from April 1, 2020.

The industry supports government's electric mobility plans, but at the same time needs proper discussions to arrive at a future roadmap for the entire auto sector. "We want to be a part of the plan. We need time to think it through as what technology is needed. Hopefully, we are going to get to some middle path regarding this...We cannot survive like this (continuous de-growth). We must survive to deliver the electric mobility plan," Wadhera said.

For total two-wheeler, sales in June declined 11.69% to over 16.49 lakh units. While motorcycle sales fell 10% to 10.84 lakh units, those of scooters were down 15% to 5.12 lakh units. Sales of commercial vehicles were down 12.27% to 70,771 units.