Auto Industry Crisis Deepens: Tata Motors, Hero MotoCorp, Ashok Leyland Halt Production

As the Indian automotive industry faces its worst slowdown in decades, more companies have decided to halt its production temporarily. Several companies in the automobile industry- be it the giant companies or small companies- have been facing a slowdown not only in vehicle production, also in component manufacturing, dealerships and other ancillary industries.

In the latest development, Tata Motors, Hero MotoCorp and TVS Group companies Sundaram-Clayton Limited and Lucas TVS are the companies that have halted their production. While Mahindra, Suzuki, Toyota and Ashok Leyland have already announced production cuts due to the low demand in the market.

As a result of this slowdown, around one million jobs are currently at stake. “Workers are being retrenched, they are not getting any kind of social security and some workers are even demoted,” said Birender, a trade unionist who is working among the workers in the industrial belt of Gurugram.

Also read: Auto Industry Crisis: Worst in 19 Years

Meanwhile, in the Tata Motors’ Jamshedpur plant, where the commercial vehicles are being produced, the production has been halted for two days- August 16 and 17. Earlier on August 1 and on August 8-10 the factory remained closed due to the challenging market situation.

“The external environment remains challenging, leading to demand contraction. We have aligned our production to actual demand and adjusted the number of shifts and contractual manpower,” the company’s spokesperson was quoted as saying.

Another automobile giant, Ashok Leyland which had paused its operations for nine days in the last couple of months served notice to its employees saying that August 17 and 19 will be non-working days. Hero MotoCorp, the country’s largest two wheeler maker, has also followed a similar policy closing down its manufacturing facilities for four days till August 18 as part of annual routine and also to adjust production in line with the current market demand. In a regulatory filing, Hero MotoCorp said its manufacturing facilities will be closed from August 15 to 18, 2019.

"While this has been part of the annual holiday calendar on account of Independence Day, Raksha Bandhan and the weekend, it also partly reflects the prevailing market demand scenario," the company added. Hero MotoCorp further said that production planning is a matter of advance monitoring of the market dynamics and prudent demand forecasting.

"This helps us to plan our production well in advance, thereby enabling us to stay flexible both in terms of volumes and production schedules," the company said.

Hero MotoCorp has been reducing its production due to decline in sales. In the April-July period this year, the two-wheeler market leader's production was at 24,66,802 units, down by 12.03% from the same period a year ago.

Also read: Over 10 Lakh Jobs in Danger as Automobile Industry Stares at Deeper Crisis

Sundaram-Clayton Limited (SCL), the parent company of TVS motor has also declared August 16 and 17 as non working days for its factory in Chennai.

The halt of production is not limited to these few companies. Mahindra & Mahindra (M&M) has already announced the closure of its plants for 8-14 days in July-September. The list continues with Tata Motors which has announced closure for eight days, Maruti Suzuki which would remain closed for three days, Toyota Kirloskar for eight days, Bosch for 10 days, Jamna Auto for 20 days, and Wabco for 19 days, according to various reports.

However, Satbir Singh, state secretary of Centre of Indian Trade Unions (CITU) Haryana said that the basis of this crisis started from 2008 and has been aggravated with the policies of the current government. “The crisis has actually began from 2008 and at that time, the impact was more more on real estate, textiles etc. But, now, automobile industry has been affected by demonetisation and GST which has also contributed to unemployment across the country. In Gurugram area alone, more than two dozens factories have been shut,” he said.

“The government, however, does not want to address the issues. The policies of government has contributed to all these issues,” he added. Along with this, Modi government’s push for the transition from BS IV to BS VI emission norms in a haphazard manner is also one of the factors for this crisis.

Between April and July this year, total production of the automobile industry dropped by 10.65% to 97,24,373 units against 10,883,730 units a year ago. During the same period, total domestic sales dropped by 13.90% to 7,910,554 units from 9,187,965 units, a year ago.

A report by the Society of Indian Automobile Manufacturers (SIAM) stated that vehicle sales across categories, including passenger vehicles (PVs) and two-wheelers, stood at 18,25,148 units last month as against 22,45,223 units in July 2018. As per the report, the previous biggest decline across overall domestic automobile sales was recorded in December 2000 when it fell by 21.81%.

In the case of domestic PV sales also saw the biggest fall in nearly 19 years, slumping by 30.98% to 2,00,790 units as compared with 2,90,931 units in the same period a year ago. Previously, the worst decline was registered in December 2000, when wholesales had fallen by 35.22%. The fall in PV sales in July was also the ninth consecutive month of decline.

Passenger car sales in July were also worst since December 2000 when the segment had declined by 39.86%. Last month, domestic car sales were down 35.95% at 1,22,956 units as against 1,91,979 units in July 2018.

Also read: Crisis Continues in Automobile Industry: 2 lakh Job Cuts in Last 3 Months

(With inputs from PTI)