Economist Venkatesh Athreya says multiple factors have led to the current situation, chiefly the global economic slowdown and the Indian government's policies.

5000 contract employees laid off TN auto industry faces crisis due to slowdownImage for representation/PTI
news Employment Saturday, August 17, 2019 - 13:27

Tamil Nadu's capital city, once dubbed the 'Detroit of Asia' due to its burgeoning automobile manufacturing units and allied industries, is now staring at a rapidly growing crisis, as demand dips for vehicles across the country. Major automobile companies are retrenching contract employees and production across the state has declined.

Tamil Nadu, according to reports, is one of the top 10 automobile hubs in the world. Chennai, reportedly has the capacity to produce about 1.4 million cars a year, or three cars every minute. It is home to brands including Hyundai, Nissan, Daimler, BMW, Yamaha, TVS and other manufacturers who are allied to the industry. The automobile industry is therefore one of the largest employers in the state and retrenchments have come as a shock to employees.

Centre of Indian Trade Unions (CITU) president of Tamil Nadu chapter A Soundarrajan, tells TNM that at least 5000 contract workers have been laid off as a result of slowdown in production.

"Over the last three months, the demand for vehicles has reduced. Either contract employees are let go off or the number of working days is reduced," he says.

According to TVS Motor Company's latest statement, sales have dipped to 279,465 units in July this year as opposed to the 321,179 units in the month of July 2018. Scooter and motorcycle exports has also been affected.

But while they offered figures on production, TVS refused to comment on the current situation.

Meanwhile, Lucas TVS, an ancillary company, has told employees that August 16 and 17 will be non-working days. In a circular sent out to employees, the management states, "We have already declared certain days as non-working due to slow sales. As this situation continues, we have to declare non-working days this month as well...We are continuously assessing sales. Once we reach a conclusion, we will announce this to workers."

Staff at Lucas TVS further told TNM that only three departments were functioning on Friday while production in other departments was brought to a halt.

While there have been no retrenchments in Hyundai yet, B C Datta, the company's vice-president told New Indian Express that they would have to take extreme steps like the other car-makers 'if the situation deteriorates'.

“Right now, there are no job cuts in Hyundai. If the situation worsens, we may think of retrenching the contract workers,” he says.

According to a report by C Shivakumar of New Indian Express, across India, 286 dealers have closed down and around 2.3 lakh people have lost their jobs. As a result, auto makers have requested the state for concessions including — reduction in Goods and service tax (GST) from 28% to 18%, phasing out diesel vehicles which are over 10 years old and petrol vehicles which are over 15 years old, and reduction of registration cess.

Explaining the slowdown in production, economist Venkatesh Athreya says there are multiple factors that have led to the current situation, chiefly the global economic slowdown and the Indian government's policies.

"What we are seeing is a broad slowdown across sector and effect on the auto-industry is clearly visible because it is a large employer," he says. "The economy is in the doldrums and the government has not pumped in any stimulus to improve the situation. The growth rate has come down and income has not grown. Therefore consumption has also come down. Both demonetisation and GST have affected small /medium players in the industry as well, reducing spending power and affecting business. And finally, with the global economy in bad shape, exports have gone down," he explains.

CITU President Soundarrajan says that discussions are now underway with retrenched employees to hold organised protests.

"But there in no point in agitating against companies. They have to slow down production to meet reduced demand," he says. "Our protests will have to be against the government whose policies have put job security at risk."

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