India’s auto parts industry warns of slashing around 1 million jobs if the prolonged slowdown in the automobile industry continues.
The Automotive Component Manufacturers Association of India (ACMA) on Wednesday sought immediate government intervention such as slashing GST to stimulate demand. It has sought a uniform GST of 18 per cent for the entire automobile sector in order to revive the vertical which has now witnessed 10 months of continuous decline in sales.
The industry body alone employs around 5 million people.
Terming the situation as “unprecedented”, ACMA President Ram Venkataramani said vehicle sales in all segments have continued to plummet for the last several months thus impacting the component segment as well.
“Considering the fact that the auto component industry grows on the back of the vehicle industry, a current 15-20 per cent cut in vehicle production has led to a crisis-like situation,” he said, adding “if the trend continues, the layoffs are inevitable and an estimated 10 lakh people could be laid off,” he was quoted as saying by PTI.
Nearly 70 per cent of the workforce in the components industry is contract workers. “So, whenever there is demand slump, there is a reduction in workers,” he said.
“The industry needs urgent government intervention… We strongly recommend that the government bring 18 per cent GST rate across the entire auto and auto component sector,” he added.
The Goods and Services Tax (GST) Council had in December retained automobile components in the highest slab of 28 per cent. The tax rates on this could not be cut due to the high revenue implication.
The new tax rates came into effect from January 1 this year.
Markets closed in the red for the sixth day in a row today.
Tata Motors saw its worst day on the bourses in nearly a year, ahead of its June quarter corporate results. The previous 2-3 quarters have been tough for auto companies who have been feeling the pinch of the consumption slowdown.