All is not well in the auto sector. Transition to newer emission norms, inventory pile ups and a downward trend in sales have veered the talk around slowdown with stakeholders in this business looking at ways to tide over the impasse.
Reduced production and plants being shuttered for close to three months are the fallouts of the auto slump. “It has been terrible in terms of growth. From a breakneck speed of a five-year high, now, it is a bumpy road for auto players,” says VG Ramakrishnan, Managing Partner and MD, Avanteum Advisors.
The efforts taken to rev up consumption, will hinge on the Budget to be presented on July 5, among other macro-economic factors. It will take few months before stabilisation sets in, he said.
Echoing the sentiment is Ramachandran Subramanian, an auto industry veteran with a 45-year track record with Ashok Leyland. Companies cutting back production or putting in place a four-day week to manoeuvre this slowdown, is not new, he says, citing the four to five instances during his tenure, when the commercial vehicle major rolled out a three-day week for its workforce. “It is a usual practice. As per the labour law, companies do offer such a programme for employees, compensating them adequately by adhering to the norms,” he says.
Noting the upcoming budget announcement, where the possibility of corporate tax reduction lies, he says, more money in the hands of people, owing to relief measures in the Budget and the monsoon would determine how the auto companies will bounce back. “In my view, September is the month when things will start improving,” he adds.
GS Ramesh, Chairman, Layam Group (HR consulting specialists) says, the transition to BS-VI from BS-IV, the cost of funds and the huge investments made for expansion plans would need to be well understood. “The auto industry has to realign its financial structure as we are staring at a recession,” he opines.
Ramakrishnan feels the scenario will change with a series of new launches lined up. “The enthusiasm will be back as marquee brands – MG Hector, Kia, Renault, have readied the template for launch of new vehicles. Some of the global launches will take place in India, restoring the consumer confidence. The excitement on account of new products hitting the market apart, this blip will help to remove the inefficiencies in the auto industry,” he added.