Major Indian auto company Mahindra and Mahindra (M&M) announced deferring of investment plans and cutting of 1,500 jobs this fiscal as a result of the auto industry's prolonged negative growth.
"About 15%-20% of capex from our original capex plan could be deferred," said M&M's Managing Director Pawan Goenka. However, the suspension will not affect new product development plans or "any other capex meant for bringing the right products to the customers", he added.
Goenka also said about 1,500 jobs of temporary workers were retrenched since April 1, 2019, and warned of further cutbacks if the slowdown continues.
More job losses are expected to take place at automotive suppliers and dealers than at original equipment manufacturers, according to the M&M managing director. He said that a fiscal stimulus package from the government, especially during the festive season, is a crucial step to achieve a positive turnaround in jobs and investments in the country's auto sector.
Recalling the previous slowdown where the government provided fiscal stimulus, Goenka said: "The only thing that can make a difference is if the government of India sees it fit to support the industry for 6-8 months, then you can perhaps see a big change."
Goenka told reporters about the company's status at the opening ceremony of Mahindra Ideal Lanka Pvt. Ltd assembly plant on Saturday. Located in Welipenna near Colombo, the assembly unit is a joint venture collaboration with Sri Lanka's Ideal Motors, reported PTI.
The company also launched its first product, a compact SUV, the KUV 100 petrol K6+ variant and plans to roll out other variants in the future. Reported to be priced at 3.2 million Sri Lankan Rupee (INR 12.85 lakh), the new unit is expected to result in significant tax savings.
"This is our first effort to sell passenger vehicles in Sri Lanka and I hope with this effort we will get to a market share similar to or even larger than what we have in India," Goenka said at the launch.
Steepest decline in sales
India's auto crisis worsened after sales of automobiles dropped 18.71 percent in July, indicating the steepest decline in the sector's sales in nearly 19 years. According to data by the Society of Indian Automobile Manufacturers (SIAM), more than 15,000 jobs were cut in the past two-three months as cost of owning spiked up due to increase in fuel prices, interest rates, vehicle insurance and unsold inventory pile up due to the heavy rains all over the country.