Auto sector's growth comes to a screeching halt
The sale of every automobile from the tractor to the truck and 'Chota Hathi' to two-wheelers has plummeted due to the slump in the automobile sector. It has directly affected the large manufacturers of automobiles and small industries supplying them goods. In Jharkhand, 1,000 small companies and in Lucknow 100 companies are facing the slump. Thousands of workers with these companies are now unemployed
Daya Sagar 26 Aug 2019 6:50 AM GMT
"Suggest which work should be undertaken from the next month? Should we sell eggs or vegetables? Should we start repairing mobiles or a run a vending cart at the intersection? Should we return to the village and start farming instead?"
These are the questions a worker poses to another fellow worker towards the end of their day's shift at Tata Motors in Chinhat Industrial Area, Lucknow. He is affected by the uncertainty due to the market slump, fall in the company's production and media's reporting of the slump. Although most of the workers shirk from talking to the media.
"21 days of August have passed the company has seen only ten actual days of operation. It remained closed the remaining days. Manufacturing previously up to 5,000-7,000 vehicles a month, the production of the company has fallen to 1,800-2,000 vehicles," an employee of Tata Motors, Lucknow told at the condition of anonymity."
Workers coming out of Tata Motors have uncertainty written large over their faces as they are unsure even of their jobs the following week. The Indian automobile market is undergoing the worst slump of the past 20 years. As per the statistics of the Society of Indian Automobile Manufacturers (SIAM), the April-July quarter of 2019 has witnessed a 21.56% fall in sales as compared to the last year. Commercial vehicles have registered a fall of 13.57% in sales whereas two-wheelers and three-wheelers have shown a fall of 12.93% and 7.43% respectively.
Fall in sales is leading to a fall in productions. As per SIAM, the April-July quarter this year has registered a fall of 10.65% in car sales as compared to last year. In the same quarter in 2018, 10,883,730 cars were manufactured whereas in 2019 only 9,724,373 cars were manufactured in the same quarter.
The products whose production has fallen or sales have slumped are directly associated with rural India. With the fall in the production of manufacturing giants like Tata, Honda, Maruti and Mahindra, the work in several allied small units has come to a standstill leading to massive unemployment in worker force mostly unregistered. The slump in production continues for the next quarter of July-September. Big automobile giants like Tata, Maruti Suzuki, Mahindra, Hyundai, Toyota, and Hero are continually dropping their production.
Due to fallen production, these companies are resorting to lay off their personnel in the name of cost-cutting. News of lay-offs is being heard from across big industrial areas such as Jamshedpur, Pune, Chennai, Adityanagar, and Manesar (Gurugram). Mahindra and Maruti Suzuki have laid off 1,000 and 3,000 employees respectively.
As per the Federation of Automobile Dealers Association (FADA), the recession in the automobile sector has resulted in the loss of job for over 2 lakh people associated directly and indirectly with the sector. FADA fears 10 lakh people of the automatic sector losing their jobs in the coming two months if the trend continues.
There is an air of uncertainty hanging amidst workers of Chinhat Industrial Area in Lucknow, Uttar Pradesh. This area produces the large commercial vehicles for Tata Motors -- trucks, buses and pick-up trucks. The company employs over 5,000 personnel.
An employee of the company informed, "Currently we work in a single shift a day with no overtime whereas previously three shifts worked back-to-back. We constantly hear from the media about the job-cuts in numerous auto-companies. There also has been news of suicide by one or two employees. We do not know if our jobs will keep another month."
With the production coming to a halt in the company, its daily workers are the most severely affected. Walking out of the plant after a day's work, a daily labourer from Barabanki Satyam Yadav, 23, said: "Nowadays there isn't much work. Whenever the plant shuts, suddenly we end up losing our wages for the day. There is, however, the hope of the situation improving so we are not giving up working here."
The whole economics is affected
The slump in the automobile industry is not limited to the auto sector and allied businesses, but the entire economy is adversely affected. For example, if one considers Chinhat Industrial Area, one would notice that Ramesh Pal's Dhabha serving 40-50 customers three months ago now barely draws 4-5 people.
A worker at the dhabha, Avdhesh Sharma, said: "Earlier by 2 pm, we used to make Rs 3,500-4,000 whereas now we only manage a sale of Rs 1,500-1,000. Earlier our daily rice consumption was about 10 kgs whereas now we cook only up to 2-3 kilos." Avedesh also informed that the owner had sacked three workers owing to a decrease in sales.
An elderly resident of the village adjoining the industrial area, Ramagya Prasad, 70, noted: "Previously, the front road always remained jammed due to the rows of truck being parked. Now that the factory (Tata Motors) is not producing vehicles, there are fewer trucks. Due to this, the sale of dhabha and pan masala-gutka has gone down. Also, the business of local kirana shops, mobile and tea shops have suffered." Prasad added that many truck operators are also affected due to lack of work and their idle vehicles are parked everywhere.
Small industries on the verge of closure
Mohammad Abrar operates a small firm -- National Engineering Works -- from Lucknow's Naderganj Industrial Area, supplying parts for Tata Motors and other automobile companies. He swears he has never, in his 40 year-long business career, witnessed such a slump.
Showing his idle machines 65-year-old Abrar said: "Previously, these used to be operated by 8 regular and 4-5 daily labourers. Our workers even used to work overtime to meet up the requirement. But now the work is so scarce that regular workers are being deployed to do clean up jobs. We can't afford to keep daily and contractual workers. I even had to terminate a regular worker. I can't remove all because I may not get such good workers later on. We are barely making the ends meet, rest is up to the God."
The automobile sector's recession has hit allied small businesses hard. These factories manufactured nuts, bolts, rims, bumpers, frame bolt, clamps, seat metal and many other body parts for Tata Motors and other automobile companies. These small units employed 100-200 men. So over 50,000 workers associated with the trade are affected by Lucknow Industrial Area alone. These workers are not only from Lucknow and adjoining area but also hail from other states like Bihar and Jharkhand.
These companies associated with the automobile sector have come to a standstill with idle machines and workers and owners waiting for the recession to end. The contractual and daily labourers not being called to work are resorting to work in farms or elsewhere.
Puneet Arora of Engineering Enterprises, Lucknow, which works for Tata, had informed that due to lack of work at Tata, 50 small and medium companies associated with it are on the verge of closure.
Similarly, 850 kms away from Lucknow, Adityapur Industrial Area of Jamshedpur, Jharkhand now has lesser production activity than earlier. Jamshedpur's Exiom, which manufactures gears for the vehicles is shut down for the past two months. The company's 10 employees had been let off. Its owner Brijendra Singh told Gaon Connection over the phone: "There are 1,000 companies like ours 90% of which are lying closed. Times are bad. What will happen to us now? Whatever we've earned in the past, we are living off by now."
As per Brijendra, Jamshedpur's biggest motor firm Tata Motors has been working only for 15 days a month in the past few months. Local media reports of 30,000 job cuts in Adityapur Loha Mandi. This is the locality where recently a youth had committed suicide fearing job-cuts.
UK Singh of Omaxe Auto, which is a 200-odd employees' company making frames for Tata Motors, informed that the production has fallen by about 70%. The company is undergoing cost-cutting wherein they purchase raw material to lessen their manpower. So, one of Tata's biggest associated firms, Omaxe Auto, has admitted to labour cuts and reduction in shifts while refusing to reveal the actual number of workers that have been laid off.
Beri Auto, firm manufacturing rims and seat metal for TVS and Bajaj, also has admitted that only 30% of the previous production is being currently undertaken. This disables them to offer any wages to the daily labourers. Holding capacity for 150 workers, Beri Auto does not have enough work to occupy its regular employees — laments its proprietor.
When Gaon Connection contacted the public relations department of Tata Motors, Lucknow, they informed: "Despite the business being affected, we haven't laid off anyone yet. We have 5,000 employees." Upon being inquired further about a reduction in production and shifts, they disconnected the phone.
Pawan Goenka, managing director, Mahindra and Mahindra, had issued a statement saying: "With effect from April 1, we have terminated about 1,500 temporary workers. We try hard not to remove any worker, but in the continuing slump we may have to let go of many more employees."
To counter the demand deficit, the companies associated with the auto-industry are coming up with numerous offers for the festival season. Two-wheeler giant Bajaj Auto is offering its small segment vehicle at the down payment of a mere Rs 999, while many car-making companies are also gearing up for lucrative offers. Car and bike financing companies are offering loans at lesser interest rates and lower processing charges.
Meanwhile, scouring through Chinhat Industrial Area when we reached a scrap shop, we found its owner Abrar Ahmed dozing off who remarked upon being woken up, "With no work, I thought it better to sleep. Previously, Tata and other companies provided 6-8 truckloads of waste and scrap per month while now it is down to a track or two." He yawns thereafter.
Abrar Ahmed, the scrap shop owner, caught sleeping on duty as there is no work for him these days
In addition, allowing higher depreciation on vehicles bought before the end of this financial year and boosting liquidity for purchase of vehicles were some of the measures announced by the Finance Minister.