Fiscal stimulus needed for India's auto industry: Mahindra & Mahindra

Indian auto major Mahindra & Mahindra has made a case for a fiscal stimulus package from the government  for the automobile sector to tide over an unprecedented slump in sales and arrest job losses. The company's Managing Director Pawan Goenka told reporters that the auto maker has retrenched about 1,500 temporary workers since April 1 this year, adding that if the slowdown continues it will be forced to lay off more employees. However, he emphasised that the concern on job losses will come more from automotive suppliers and dealers and not as much from original equipment manufacturers.

“I think from April 1 till now we have removed about 1,500 (temporary workforce)... We are trying not to remove more but if the slowdown continues we will probably be forced to remove,” the Mahindra & Mahindra MD said.

Goenka was speaking on the sidelines of the opening of Mahindra & Mahindra's first completely knocked down automotive assembly unit here in a joint venture collaboration with Ideal Motors of Sri Lanka.

Christened as Mahindra Ideal Lanka Pvt. Ltd. the local assembly plant located in Welipenna near Colombo on Saturday also rolled out its first product, the compact SUV, KUV100 petrol K6+ variant to start off with, followed by other variants in the near future.

The local assembly cum manufacturing operations will lead to significant tax savings for Mahindra Ideal Lanka, which is hoping to price the KUV100 below 3.2 million Sri Lankan Rupee (INR 12.85 lakh).

“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.

He observed that achieving a turnaround was crucial for India's  automotive industry during the ongoing festive season, otherwise a significant negative effect may be witnessed in terms of jobs, investment, and even suppliers being forced to declare bankruptcy.

“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 said.

Asked if a fiscal stimulus was required from the government at this stage, he replied in the affirmative.

“In the previous slowdowns, both times the government had given a fiscal stimulus and both times they have worked very well,” Goenka said .

Automobile sales in India witnessed its sharpest decline in nearly 19 years in July, dropping 18.71 per cent, rendering almost 15,000 workers jobless over the past two-three months as the sector reels under a prolonged slump, auto industry body SIAM reported earlier this month.

"If you look at our capex we have 15-20 per cent capex that has been deferred from our overall investment," Goenka said.