COVID-19 Lockdown impact: India’s automotive industry suffered Rs.2,300 crores loss per day, job loss of 3.45 lakh people says Parliament panel

Will the job losses in the Auto Sector be permanent? 18-20% shrinkage, says Parliamentary Committee Report

December 15, 2020

COVID-19 pandemic and lockdowns strike Auto Sector

A Parliament panel on Tuesday said that the COVID-19 pandemic and lockdowns caused Rs.2,300 crores per day loss and a job loss of 3.45 lakh people in India. According to a parliamentary panel report submitted to Rajya Sabha Chairman M Venkaiah Naidu, the panel observed that equipment manufacturers cut down 18-20% in production and as many 286 auto dealers shut shop during the pandemic. The Parliamentary Standing Committee on Commerce, chaired by Telangana Rashtra Samithi (TRS) MP Keshav Rao, has also suggested a slew of measures for attracting investment in the automotive sector in the country, including overhauling of prevalent land and labour laws.

“The committee was informed by the auto industry associations that all the major original equipment manufacturers (OEM) have cut down their production by 18-20 percent due to low demand and decline in sales of vehicles. As a result, the employment scenario in the automobile sector has been affected and an estimated job loss in the auto sector at 3.45 lakh,” the panel said in its report.

The Standing Committee further said the actual magnitude of the impact depends on the duration of the lockdown period, the intensity and extent of the spread of the COVID-19 outbreak.

The hiring of manpower has been stopped in the auto industry sector. Besides that, 286 auto dealers have been closed. Further, production cuts in the automobile sector have a percolating negative impact on the component industry adversely affecting the Micro, Small and Medium Enterprises (MSME) engaged in the automobile spare parts manufacturing, the report states.

“As informed by the Automobile Industry Associations, the production stoppage at the automotive OEM and component supplier due to the COVID-19 pandemic and subsequent lockdowns led to a loss of approximately Rs 2,300 crore per day to the automotive sector,” according to the report. The Standing Committee further said the actual magnitude of the impact depends on the duration of the lockdown period, the intensity and extent of the spread of the COVID-19 outbreak.

Considering the crisis, it is predicted that the automobile industry is likely to go through at least two consecutive years of severe contraction, leading to low levels of capacity utilization, lack of future CAPEX investment, high risk of bankruptcy, and job losses across the entire automotive value chain, the committee said.

[with PTI inputs]

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