The rotation of the automotive components industry falls by 10% in April-September; 1 lakh temporary workers lose jobs

NEW DELHI: The car component industry Turnover witnessed the worst decline in the first half of the current fiscal year, which led to a job loss of about 1 lakh of temporary workers until July of this year, the Automotive Components Manufacturers Association said Friday (ACMA), industrial body.

Industry turnover fell to Rs 1.79 lakh crore in the period from April to September, 10.1 percent less than Rs 1.99 lakh crore in the period of the previous year, ACMA said.

The industry agency said the slowdown has also resulted in an investment loss of up to $ 2 billion during the period.

Exports, however, registered a marginal growth of 2.7 percent to Rs 51,397 million rupees ($ 7.5 billion) during the period, while the secondary market segment grew 4 percent to Rs 35,096 million rupees ($ 5.1 billion).

The import of components decreased 6.7 percent to Rs 57.574 rupees ($ 8.4 billion), ACMA said.

The automotive industry faces a prolonged slowdown. Vehicle sales in all segments have continued to plummet over the past year, ACMA President Deepak Jain told reporters here.

Given that the automotive component industry is growing in the back of the vehicle industry, a current 15-20 percent cut in vehicle production has negatively impacted the component segment, he added.

The last time the automotive components industry witnessed a decrease in billing was in 2013-14 when it fell 2%, ACMA said.

Regarding the loss of jobs, Jain said the reduction occurred from October last year to July 2019.

Mainly, it is temporary employees who have lost jobs during the period, Jain said, adding that it was because the component manufacturers adjusted production to demand.

He said a 10 percent growth would have added $ 6 billion of revenue, for which the corresponding investment could have been around $ 2 billion.

Therefore, the investment loss due to the slowdown would be around $ 1.5-2 billion, he added.

Currently, he said that the capacity utilization of the component industry has been reduced to 50 percent from around 80 percent when growth was at its peak.

ACMA said that the low demand for vehicles, the recent investments made for the transition to BS-VI from BS-IV, the lack of liquidity, the lack of clarity in the vehicle electrification policy, among others, had an adverse impact on Expansion plans for the component sector.

Jain said that only in the BS-VI transition, the automotive industry as a whole has invested around Rs 80,000-90,000 rupees, of which the component sector has invested Rs 30,000-35,000 rupees.

Seeking government intervention for a sustainable long-term growth of the car component industry , he said one of the key demands of the sector has been for a uniform GST rate of 18 per cent on all parts.

Currently, 60 percent of car components are taxed at 18 percent and the remaining 40 percent, most of which are two-wheel components and tractors, with 28 percent. This has led to the flourishing of gray operations in the secondary market. he said.

A uniform rate of 18 percent will ensure better compliance and a higher tax base, Jain added.

Affirming that most component manufacturers are MSMEs, he said ACMA is seeking a revision in the definition of MSMEs, from one based on investment in plant and machinery to billing.

"Considering MSMEs constitute over 70 per cent of the car component industry , change in definition will enable a wider section of the industry avail of government incentives," Jain said.