As auto sales slip again, firms call for stimulus, talk layoffs

Domestic car sales dec­lined by 7.4% in July, the ninth consecutive monthly sales dip, as consumers hit by high fuel prices and interest rates preferred to stay away from showrooms. The slowdown also spre­ad to utility vehicles, the industry's last growth bastion, with sales growth slipping by 17.5%, the first time in over four years.

The prolonged slowdown threatens to spiral into a major crisis as many car makers are now contemplating pruning workforces to contain costs. Companies such as Maruti, Toyota, Tata and Mahindra have already benched temporary many workers.

"It is a very serious situation for the industry. The original equipment manufacturers have started adjusting temporary and casual workforce," said Vishnu Mathur, director general, Society of Indian Automobile Manufacturers (SIAM). "In the manufacturing sector, not restricted to auto sector alone, companies by and large tend to keep more temporary and casual workers."

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Around 1.1 million people are employed in the industry either in automobile factories or by their component suppliers and at dealer and service workshops.
Around a fifth of these are temporary or casual workers.

While Maruti Suzuki India (MSI) has already benched some temporary workers at its diesel engine plant in Manesar. Toyota Kirloskar Motor has also not renewed contracts for an unspecified number of workers at its factory in Bangalore.

Domestic passenger car sales declined to 131,163 units in July from 141,646 units last year, while total sales of commercial vehicles dropped by 14.93% to 55,301 units from 65,008 units a year ago.

Total sales of vehicles across categories decline by 2.08% to 1.41 million units in July from the year-ago period.

Utility vehicles, which saw high double-digit growth in 2011 and 2012, registered their first monthly decline in sales since May 2009.

"The 3% additional excise duties has damaged the segment," Mathur said. "There are other factors like increasing price of diesel, interest rates and an overall economic downturn but we have seen that the impact of the higher duties was immediate."

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