With car and vehicle sales continuing to reel under a prolonged slump, fresh hiring of employees has been frozen in India's automobile sector while layoffs loom large.
According to industry bodies Society of Indian Automobile Manufacturers (SIAM) and Automotive Component Manufacturers Association of India (ACMA), with demand continuing to be low and factories not operating at full scale, this may lead to temporary excess overheads.
"What is coming out is that laying off may not have started but recruitments in many companies have been restricted," SIAM Deputy Director General Sugato Sen said.
Expressing similar sentiments, Rico Auto Industries Chairman, CEO & Managing Director Arvind Kapur said: "At the moment there are no fresh investments taking place in the (component) industry and hence there is no new hiring."
When asked if there would be layoffs, he said: "It is a difficult situation as you invest a lot in training people and they cannot be done way with just like that. So, as of now there are no cutting of jobs, however, if the situation carries on for six months or so, then definitely there will be."
Car sales in India had fallen for a record seventh consecutive month in May this year at 1,43,216 units, down 12.26 per cent from the same month last year, prompting SIAM to caution that the prolonged slump in the market could result in job losses in the automobile sector.
The sales decline had forced companies to cut production and in the April-May period this fiscal, overall car output in India was at 3,96,395 units, down 13.03 per cent compared to the same period last year.
Earlier this month, car market leader Maruti Suzuki had shut its two plants at Gurgaon and Manesar for a day ahead of a six-day scheduled maintenance closure on June 17-22. Such production cut had a trickle down impact on component makers.
"Output is down by around 40 per cent. There is no denying that there will be job losses in the automobile sector. This year it is going to be worse. The contract labourers are the first one to be hit," said an official of a component manufacturer, who asked not to be identified.
When contacted, ACMA Executive Director Vinnie Mehta admitted that the downturn in the auto industry is hurting the component manufacturers.
"In adverse times, everybody is affected and we would like to see the good times return at the earliest," Mehta said.