Auto Component Sector Likely To See Job Cuts If There's Weak Demand: ACMA

The Indian auto component sector is likely to see massive job cuts if the sector continues to face business difficulties because of the reduced demand owing 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 the auto component manufacturers would be forced to cut down workforce in a bid to survive because of muted demands and excess capacities. Moreover, SIAM has already predicted an annual downturn of 35 to 40 per cent because of the COVID-19 crisis.

Also Read: GST Reduction & Scrappage Policy Will Help Revive Commercial Vehicle Industry: Ashok Leyland

Due to lack of demand amid COVID-19, the auto component sector may see huge job losses

Automotive Component Manufacturers Association of India (ACMA) President Deepak Jain said, "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. 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 a temporary workforce right now but if demand doesn't pick up it could be others as well."

Notably, the domestic auto component sector employs approximately 50 lakh people, which has seen a decline of 18 per cent last year. And, the same is expected to contract between 20 per cent to 40 per cent. Speaking about the plan to curtail investments due to the current situation, Jain said: "There is excess capacity and hence there is no point in expanding capacities right now."

Also Read: FADA Wants Manufacturers To Increase Fixed Dealer Margin To 7% Of Selling Price

The domestic auto component sector employs approximately 50 lakh people

Apart from aviation and hospitality, the auto component space is among the top five stressed sectors in the country right now. The sector was already witnessing 15-month of downturn when the coronavirus outbreak hit the sector. He further mentioned that priority lending on auto loans, and auto dealers and service stations could be effective in boosting demand and it should be included under the MSME Act.

ACMA has about 850 companies as members that contribute over 90 per cent of the industry's turnover in the organised sector. Moreover, the turnover of the auto component sector currently stands at around USD 57 billion, which contributes about 2.3 per cent of India's GDP.