[TusharK]

According to the Federation of Automobile Dealers Associations (FADA), around 2 lakh automobile dealership employees lost their jobs in the last 3 months.



In the past few months, the auto sector has been experiencing an unprecedented slow down. While sales have slumped, auto dealerships are looking to cut costs by laying off employees.

In the last 3 months, majority of those who lost their jobs were front-end sales workers. However, it is believed that if the slowdown continues, technical jobs might also be affected.

In the 18 month period that ended in April 2019, 286 showrooms in 271 cities were shut down. This is said to have resulted in 32,000 job losses.

According to the Society of Indian Automobile Manufacturers (SIAM) vehicle sales dropped by 12.35% in April-June 2019 compared to the same period last year.

Source: Economic Times

Link to Team-BHP News

[MukundanMK]

Originally Posted by TusharK

In the last 3 months, majority of those who lost their jobs were front-end sales workers. However, it is believed that if the slowdown continues, technical jobs might also be affected.

This is indeed sad and the most disheartening news, when we talk about slowdown or recession. Few of these folks have/would have managed to move to MG or Kia dealerships. Few of the dealers that I dealt with in MG and Kia all had experience in other car brand dealerships like Ford, Fiat and Hyundai. MG and Kia definitely have come in as blessing in this disguise automobile slump period, for the dealers.

[TorqueKnight]

So sad to witness this. But it may be partially due to people's shift towards apps based taxis, 10 year rule for Diesel engines, uncertainty regarding the future of conventional engines and governments policies regarding EV's.

Not just in Metro's but even in small towns people are aware of risk in buying new vehicles. If government has a plan for 100% EV in 2030 then they will phase out the conventional engines soon. Not just in Delhi but in other parts of India also they will introduce the 10 Year rule. Who want to buy a car if the value is only for 10 years?. This was the question I was asked about from my relative who is from a rural area. Makes sense but also confusing.

[sumeethaldankar]

I think the slowdown is due to the upcoming emission norms. People are just waiting and watching as the current batch of vehicles (not the recently launched ones) sport engines which will be outdated by next year. People are probably waiting for the new generation of engines/models to come, that is why they are probably holding purchases. I am sure sales will pick up once these awaited models are launched however for the current year till the deadline it is going to be a blood bath for sure.

Car Manufacture's only hope to revive sales is to bring in the next year's models this year by quickly upgrading their line ups. A good example is the Brezza. Maruti has already lost it's market share to the Venue. They probably will hurry and plonk in their 1.5 Hybrid petrol in the same and launch it this year itself. The way I see Hyundai caught Maruti napping.

[jaaz]

There is slowdown in the economy, and we've to accept it. The effects of demo will be immediate on poor people, but will take couple of years on the whole economy. Add to that, the real GDP is less than actually reported. All these factors are like under current, which are felt now. The govt. is in no mood to address the problems because, other sectors are also affected. So, they cannot bail out one industry and ignore others. But Automobile manufacturing constitutes to about 49% of the Manufacturing GDP, which has to be bailed out at the earliest.

I agree with the other factors mentioned by our friends, but they are of minimal impact, compared to the larger ones.

[Santoshbhat]

Originally Posted by sumeethaldankar

I think the slowdown is due to the upcoming emission norms. People are just waiting and watching as the current batch of vehicles (not the recently launched ones) sport engines which will be outdated by next year. People are probably waiting for the new generation of engines/models to come, that is why they are probably holding purchases. I am sure sales will pick up once these awaited models are launched however for the current year till the deadline it is going to be a blood bath for sure.

I highly doubt that. General public really doesn't care and I am sure most are unaware what these norms mean. They may be interested in the next gen engines if they promise to be more efficient or more powerful or more refined and that's it. The new engines are expected to be more expensive and on that count it would be prudent to prepone your purchase!

The slowdown is just basic lack of demand. Reasons for the lack of demand are plenty and a combination of many factors and it has just caught everyone on the wrong foot.

[AWD]

This was in the offing. I remember a few years back financial advisors asking me to invest in Auto Industry shares, I was always reluctant as I knew the bubble was about to burst any time. Auto Industry was digging its own grave by various means;

*Exorbitant increase in prices of vehicles
*Nothing much in name of Technological development
*Not adopting alternate fuel technologies.

Things out of ambit of Auto Industry that directly affected them;

*Inadequate infrastructure development
*Rising Pollution
*Market slowdown

Auto Industry should have always kept in its mind that this is not a basic needs Industry, unprecedented increase in prices will sink the ship sooner of later. I for one do not shed a single tear in its fall. Move on, you should have done your part in conserving the environment, in providing commute at reasonable profits. Undue looting of consumers had to have its repercussions sooner of later.

[Thermodynamics]

Originally Posted by AWD

I for one do not shed a single tear in its fall.

Sir, I would like to differ. You know what it takes to go home having lost a job with EMIs and house rent haunting your thoughts and then you see your kid coming back from school, hugs you and says “papa, I need to buy stationary and shoes”. As a responsible forum we need to be considerate and compassionate of fellow industry pals. 200000 lost jobs is not a joke. These are direct jobs, so many auxiliary industries, petrochemical industry are dependent on Automotive segment. The very thought of scale of unemployment due sends shivers down the spine.

Originally Posted by AWD

*Exorbitant increase in prices of vehicles
*Nothing much in name of Technological development
*Not adopting alternate fuel technologies.

Exorbitant? Cost of steel in 2010 was 25000/mt and today it sells north of 40000/mt. Slowly but steadily the taxes on vehicles have increased year on year and budget after budget. 50-60% of the “Exorbitant” price is “Exorbitant” tax.

Technological development : Hybrids are ready today, they are greener as well but then what about our policy ?.

Not adopting alternative fuel : I guess this is referring to methanol from coal and ethanol from cane/corn. Both have lower calorific value, Methanol is corrosive and there ain’t any business case either. It was the sugar/corn farmer lobby that forced US to order regulation of mixing 10% Ethanol in Gasoline. We neither have the free expanse of agricultural lands like the US nor have abundance of Coal. The clear beneficiary here is China which has plans of turning it’s abundant coal resources into value added products and exports.

[aravind.anand]

If I were to look beyond the gloom, I think a majority of these shut downs and job losses might have come from GM shutting shop in India, and DSK-Benelli getting wiped out among two wheeler manufacturers.

There is no escaping the fact that the Industry is facing a really tough time, and that it is a very tough phase for all of them directly associated with the industry. But I don't think a wise dealership would fire their sales team when the times are tough. Isn't that more like shooting one's own foot?

[superbad]

Originally Posted by TorqueKnight

Who want to buy a car if the value is only for 10 years?. This was the question I was asked about from my relative who is from a rural area. Makes sense but also confusing.

10 years is a sufficiently long period to have utilised the car to the maximum extent, derived maximum returns from it. In this case, resale value is moot.

[CliffHanger]

Originally Posted by Thermodynamics

Exorbitant? Cost of steel in 2010 was 25000/mt and today it sells north of 40000/Mt.

An approx 20 ton weighing top of the line Volvo bus costs approx 1.2 crores and an approx 1.3 ton weighing decently specced Creta costs approx 16 lakhs and a 1.2 ton Honda City costs similar.

Now, do the Math. I'm not even considering the numbers these cars sell compared to the top of the line Volvo.

Truth is Automotive industry is operating like the telecom industry of the bygone era, ripping customers off on every given opportunity.

It took some time for the Telecom industry to rationalize, the same is happening to Auto industry. Look at your telephone bill and broadband bill and speed now and then check the bills for the same 5 years back. Don't say their operating costs have gone down and taxes have gone down.

Regarding losing job - No private job guarantees you life long support, it's your responsibility to plan and support during rough times.

[pganapathy]

Originally Posted by superbad

10 years is a sufficiently long period to have utilised the car to the maximum extent, derived maximum returns from it. In this case, resale value is moot.

I have to seriously question that. Pretty much every car we own (my parents, my in-laws and me) are between 10 and 20 years old, possibly a bit more. None of them have reached the end of their useful life, though maintenance costs have increased due to some parts failing. However, when I consider the overall cost, it is still cheaper for me to hold onto these cars rather than purchase a new car.

Yes, I am sure that this mentality is contributing to the downturn in the auto industry. In all honesty, I doubt I would buy another new car until I move back to Coorg. As long as I am in Bangalore/Bombay, I would either purchase a used car or get one on lease/rent on demand

[rdst_1]

Originally Posted by superbad

10 years is a sufficiently long period to have utilised the car to the maximum extent, derived maximum returns from it. In this case, resale value is moot.

Majority of India doesn't live in overcrowded cities with long commutes. The rural and small towns also contribute a lot to auto sales where you don't drive a lot on a regular basis. Hell, my brother lives in Hyderabad and was in Bangalore earlier and his daily commute was barely 7kms to and fro. Such usage with a few outstation trips now and then would only result in a usage of 70k at most in 10 years. I currently drive a 2002 Fiat Palio with barely 1.5L on the odo and there is still nothing wrong with the car that I would need to scrap it.

So, the many people like I mentioned above would now consider not buying a vehicle in the first place if it is going to be scrapped within 10 years.

[bordeaux]

Originally Posted by superbad

10 years is a sufficiently long period to have utilised the car to the maximum extent, derived maximum returns from it. In this case, resale value is moot.

Driving a 2009 Honda City Petrol with 150K kms on the Odometer (I bought it used in 2013 at 50K kms). Unless I have an itch to just throw away my money, this car is not going anywhere. The newer cars don't have much to offer in terms of ROI other than a few fancy switches here and there. They carry almost the same engine, same fuel efficiency etc. And even the maintenance costs are not that high compared to a new car. Best part is insurance cost is like 10% of what a newer car's insurance would cost.

Discarding this car at this time will be rather criminal wastage of resources.

[twin_turbo]

Originally Posted by CliffHanger

It took some time for the Telecom industry to rationalize, the same is happening to Auto industry.

Totally agreed. The problem with the auto industry is double fold

1. 2 or 3 major automakers rule the market. If Suzuki hikes the prize for swift, every other manufacturer benchmarks Suzuki and thinks that they can get a customer to pay the same prize for their car too. It was only so much that people would pay for a swift. Then there are other car makers who got 1 model that people want and they raise the cost of that vehicle until its too expensive or non-competitive. For eg. Ecosport was launched at 5.xx lakhs for base petrol!

2. The industry is very capital intensive and provides very low profit margins. So it is extremely difficult for a 'Jio' to emerge and disrupt the industry. Partly because for a car manufacturer to disrupt, there should be 5000 suppliers who should also be willing to go along. Unlike some other industries, it is extremely reliant on these supplier for technology and manufacturing of parts.

Used car purchases is a factor to an extent but not so much. The new car sales are closely tied to the sales of used cars. At first this may not make much sense. But when you look at a bigger picture, if everyone started buying used cars, the price of used cars would go up and this would push the new car sales. This is something auto industry studies carefully, especially in matured markets like the US where a batch of lease vehicle become available in the used car market.