2019-08-11_Business_Today

with the slowdown, the huge labour

force attached to it is anxiously ob-

serving the situation. “We have not

experienced any termination or lay-

offs for permanent workers in the auto

sector in Tamil Nadu till now. But giv-

en the crisis, workers are scared,” says

C. Thiruvettai, District General Sec-

retary of the Centre of Indian Trade

and medium-scale players are in a
tough spot. “Compared to last year,
there is a big drop in the orders from
OEMs this year,” says S. Thyagarajan,
Director, Mudhra Fine Blanc, which
manufactures parts for brakes, wipers
and engines among others. “We are
among the lucky ones as our product
category is wider and we cater a lot
to the after-sales market. This is not
the case with small players who have
a smaller range of products or with
companies in the Tier 3 and Tier 4
categories (sub-contract companies),”
says Thyagarajan, who is also the
president of the Manufacturers Asso-
ciation of Irungattukottai SIPCOT in
Sriperumbudur.
The Managing Director of a Chen-
nai-based company (speaking on con-
dition of anonymity) that makes and
supplies die castings for companies
such as Maruti Suzuki, Lucas TVS
and Brake India, says, “Our revenues
have dropped over 30 per cent this
year compared to the same period
last year. From last January, business
orders have fallen. We are now strug-
gling to manage day-to-day opera-
tions. I have to micromanage and take
tough measures to reduce cost. This
will include reducing manpower, de-
creasing the number of working days,
and so on.” He adds that the company
has not downsized yet but, like many
of its peers, is looking at it seriously.
The company has reduced or stopped
contracts with a few smaller compa-
nies that undertake plating and pow-
der coating work for them.
The slowdown is having a cascad-
ing effect, notes C.K. Mohan, General
Secretary, Tamil Nadu Small and Tiny
Industries Association. “The auto in-
dustry is highly interrelated. Many
micro and small scale companies take
orders from the medium and bigger
component manufacturers and oper-
ate on very low profit margins (less
than 10 per cent). Many were already
burdened by GST and demonetisa-
tion,” he says. Companies that make
engine parts were affected financially
by the BS-4 to BS-6 transition as well.

Hard Knocks
While the industry comes to terms

Union (CITU). “Workers in bigger

factories are protected at present and

are getting their salaries and other

benefits on time. However, there is no

overtime work now,” he says.

Agrees E. Muthukumar, President

of Hyundai Motor India Employ-

ees Union. “When business reduces,

companies can’t cut the labour force

then and there. When the sector was

thriving, labourers worked even on

holidays and got double wages and

overtime benefits. That has stopped,”

he says. S. Gauri, an employee at a ma-

jor OEM, says the number of working

days has reduced. “In the past few

months, we’ve had work only for three

days a week; on the other two days, we

have to take forced leave,” he says.

Employees have more to be con-

cerned about than just the poor auto

sales. With a host of incentives for

electric vehicles in the recent Budget,

and NITI Aayog’s policy proposal

to ban internal combustion engine-

driven two- and three-wheelers by

2025 and 2023, respectively, many

SME component manufacturers fear a

wipe out. “The urgency shown by the

government towards electrification is

an area of concern for the auto ancil-

lary industry,” says Kumar of Frost

and Sullivan. “A transition based on

the congestion index of a few cities and

incentives would serve the electrifica-

tion goals better. These should ideally

be studied in detail before a pan India

rollout,” he says. At present, India does

not have a manufacturing ecosystem

for EVs. “India is importing around

`1,800 crore worth of EV components

from China alone,” Kumar adds.

According to industry experts, an

average car with internal combustion

engine has 30,000 parts while an EV

has about 300. “So, many companies,

especially those that makes engine

and transmission parts, or are into

forging and casting, may close down,

unless they change and start making

parts for EVs, which will need heavy

investment. Plus, the time frame

is too less for the transition,” says a

Chennai-based component maker.

Allied Industries Affected

It’s not only the component manu-

CORPORATE>AUTO

ASWIN KUMAR,

Associate Director, Mobility,

Frost and Sullivan

S. THYAGARAJAN,

Director, Mudhra Fine Blanc

“The slowdown

is having a

domino effect.

It has affected

all stakeholders,

particularly

component

manufacturers”

“Compared to

last year, there

is a big drop in

orders from

OEMs this year”

70 IBUSINESS TODAYIAugust 11 I 2019