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July 2019 Marked An Inflection Point And Auto Industry Sales Fell By A Record 40% Pushing Many Into The Red

When a reputed global news agency like Reuters carries a news report on August 6, 2019 that since April 2019, automobile and auto component units and automobile dealers in India have laid off 350,000 workers, it is bound to send shock waves globally. India’s economic slowdown under Modi 2.0 has now come under global limelight. How serious is the crisis in the auto sector?

Car sales have been plummeting for nine months continuously till July 2019. Compared to the performance in the year ending in June 2018, in the next year ending June 2019 Maruti Udyog witnessed 17.2 per cent dip in sales, Hyundai 7.3 per cent, Honda 41.4 per cent, Toyota 19 per cent, Tata Motors 26.7 per cent and Mahindra & Mahindra (M&M) 3.8 per cent.

Passenger vehicles sales hit 18-year low in Q1 this fiscal. Commercial vehicles segment fared no better—Tata Motors truck sales were down by 7.4 per cent, Leyland 18.9 per cent, Volvo Eicher 28.5 per cent, and M&M 14.7 per cent. Decline in tractor sales was also in double digits. Among two-wheelers units, TVS suffered an 8 per cent decline in sales.

July 2019 marked an inflection point and auto industry sales fell by a record 40 per cent in that month pushing many auto industries into the red.

Reuters based its story on the claims of Automative Component Manufacturers of India Director-General Vinnie Mehta who has been making such claims for quite some time. The Federation of Automobile Dealers Association President Ashish Harshraj Kale claimed 2.5 lakh jobs had been lost in the automobile dealership system. These could possibly be inflated claims but they are a response to government’s indifference.

The auto industry chambers have been demanding reduction in GST even before the budget but the government not only turned a blind eye but increased taxes on petrol and diesel by Rs.2 a litre. On August 7, the captains of automobile industry, including RC Bhargava, Chairman of Maruti Udyog, went and met Finance Minister and appealed for a reduction of GST from 28 to 18 per cent and requested for greater flow bank finance at softer rates in view of the liquidity crisis faced by automakers, auto dealers and auto components units alike. But she didn’t give them any categorical assurance.

Instead of sustained lobbying with the Centre at policy level for a rescue package of an industry in crisis, the industry lobbyists had earlier persuaded the Tamil Nadu government to declare auto component industry as ‘public utilities’ to ban strikes in them in the State, which is home for one-third of the automobile component production in the country. The State government too, instead of asking the Centre to take steps to mitigate the crisis, resorted to unlawful short-cut and declared auto component units as public utilities, banning strikes in them. But AICCTU, which is a strong union among automobile and auto component workers, filed a writ petition in Madras High Court challenging this decision of the Tamil Nadu government and obtained a stay on this on August 1, 2019, which is unprecedented in the history of labour litigation. AICCTU All-India President S. Kumaraswamy says that thanks to the strong union movement in Chennai auto hub the employers are not able to lay off regular workers as they please but they try to shift their burden on workers in other subtle ways.

Even Leyland is declaring shutdowns for a few days forcing the workers to go on formal leave without any compensation. Some ancillaries, however, are forcing the workers to do Sunday work without any overtime. Some component units have just started laying off of contract workers and temps as in Gurgaon-Manesar or in Pune and Gujarat while others are resorting to pre-planned strike-breaking recruitment of temps anticipating strikes when regular workers have formed unions.”But thanks to the powerful unionisation, so far there have been no wave of layoffs or wage cuts yet but they are preparing for a showdown and we are also preparing to counter that”, says Kumaraswamy.

The CITU President of Kancheepuram district Muthukumar, who is leading struggles in many auto units, also concurs with such a view and elaborated on plant level impact of the crisis and the response of the workers. The auto component units have adopted a uniform policy of 10 per cent cost reduction. The tyre industry is declaring 4 days leave without wages but some auto component units are forcing the workers to work even on August 15 without double wages. Contract labourers are the worst hit, he says.

Kulasekaran, who owns an auto component unit IP Industries in Bangalore, says that production is down by 50 per cent in auto component units in Bangalore. This is because auto sales are down and unsold inventories have accumulated to the tune of Rs. 34,000 crore with the dealers. “Apart from the usual cyclical factors and lack of buying power, the feeling among buyers is to wait for new vehicles compatible with Bharat Stage VI emission norms after Modi Government’s hasty announcement of adoption of the new BS-VI emission norms by 2020 and also to see the introduction of electric cars on Indian roads in 2020. This has also contributed to decline in sales.

Modi government has declared a policy of forced switchover of all three-wheelers to electric vehicles from 2023, two-wheelers by 2025 and cars by 2030 without any budgetary support for effecting such a switchover. Instead of opposing such impractical policies of the Centre and infringement on federal rights, the governments in Karnataka and Tamil Nadu are meekly accepting the Centre’s highhanded policies”, he adds.

Auto workers have shown exceptional militancy in the last few years and probably the country would witness a new wave of struggles by these workers who are forced to bear the brunt of the auto industry crisis.