Chennai, which may have an installed capacity to produce 1.3 million cars and about 3.6 lakh commercial vehicles each year, is staring at troubled times as many auto majors and auto component manufacturers have cut down production in double digits and some are retrenching contract employees.
The state government under Vision 2023 enunciated by former chief minister J Jayalalithaa had plans to have an output of three cars every minute and one commercial vehicle every 75 seconds in Chennai.
But this may not materialize due to the downturn of economy as automobile sector is seeking the aid of the government to help revive the sector.
While there are no figures as to how bad the auto component sector or auto manufacturing sector in the city has been hit, Sugata Sen, deputy director-general, Society of Indian Automobile Manufacturers (SIAM), says that across India 286 dealers have closed down and around 2.3 lakh people have lost their jobs.
Sen says that many Chennai-based automobile majors are facing crunch including Ashok Leyland, TVS Motors, Hyundai among others. When Express tried to reach out to Ashok Leyland and TVS Motor officials they refused to comment.
Centre of Indian Trade Unions (CITU) president of Tamil Nadu chapter A Soundarrajan told Express that most of the auto majors and auto component manufacturers have retrenched trainees and contract employees. Around 4,000 to 5,000 workers have been retrenched. Many original equipment manufacturers (OEMs) have resorted to working five days a week as there are no orders, he says. The situation may be grim if the economy doesn’t revive, he says.
B C Datta, vice-president of Hyundai, said Hyundai could go in for retrenchment like the other car-makers if the situation deteriorates.
“Right now, there are no job cuts in Hyundai. If the situation worsens, we may think of retrenching the contract workers,” he says.
However, there has been massive retrenchment among our vendors who make auto components for the company, he says. “Since the production is down by 10 per cent, it is affecting the auto component manufacturers,” says Datta.
Interestingly, auto-makers in the state have approached the state and Centre for concessions.
Datta says that automakers are seeking reduction in Goods and service Tax from 28 per cent to 18 per cent from the Union Finance Minister. “If the government doesn’t want to give it for luxury segment, they can reduce for cars priced less than Rs 10 lakh as 70 per cent sales happens in this segment,” he says.
He also said that among other demands is the phasing out of diesel vehicles which are more than 10 year old and petrol vehicles that are 15 year old. “We have put forth this demand as it will reduce pollution and consumption of petrol and diesel by these BS-II vehicles.
It is learnt that automobile industry has represented the state government to reduce the registration cess. “For every vehicle above Rs 10 lakh, one has to pay registration charge of 15 per cent and it keeps coming down for vehicles less than Rs 10 lakh. We wanted the slab to be cut by around 5 per cent,” says the official of a car manufacturing company.
But Sen says that the sector could revive only if the economy revives. Firms like Ford, Daimler, Nissan, Yamaha, Royal Enfield, Renault, Hyundai, BMW and several others have set up facilities in Chennai and Orgadam to tap the emerging Asian markets besides even markets in Europe and America.
Chennai Port Chairman Ravindran says that car exports have grown when compared with previous year. “Last year, Chennai Port exported 39,600 vehicles and this year, we had exported 57,500 vehicles,” he says. However, in Kamarajar Port there has been neither growth nor dip in car exports, he says.
TVS sales dip
TVS Motor Company sales have slumped with the company registering sales of 279,465 units in July 2019 as against 321,179 units in the month of July 2018. The sales in scooters and motorcycles has been hit so has been the exports, if one goes by TVS statement released earlier this month.