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The financial year 2013-14 was one that most automobile manufactures might like to forget in a hurry: While the growth rate for the industry slipped into the negative territory, companies were forced to trim their workforce as a desperate measure to stay afloat.
Going by the estimates of Vikram Kirloskar, president of the Society of Indian Automobile Manufacturers, the industry could have seen 100,000 to 150,000 jobs lost across the value chain. And, amid the slump automobile companies were dealing with, there were some major union flare-ups, too - these were to thwart firms' attempts to curtail mainpower (like at General Motors India, which renewed contracts of only half of its contract workers) or for wage hike re-negotiations (at Toyota Kirloskar and Bajaj Auto).
Will the coming two years change the picture and bring back the jobs lost last year? Given investment decisions taken by automobile companies, that looks likely. Banking on a pick-up in demand, Honda Motorcycle and Scooter India (HMSI), Honda Cars India, Ford India, Mahindra & Mahindra and Yamaha, as well as Isuzu, the new kid on the block, have announced their investment plans. These companies have already invested or are investing about Rs 24,000 crore in creating more capacity.
The combined investment and their statements on the number of people they plan to hire suggest that a little more than 21,000 new direct jobs would be created across half a dozen factories coming on stream over the next two years. Based on various estimates, the number of indirect ancillary jobs created would be between three and five for every direct job that comes up. So, the number of jobs to be created over the next two years could be 80,000 to 120,000; this will take the automobile industry's total workforce back to the level of 2012-13.
For instance, Ford India is planning to hire 3,000 people this year for its coming plant in Gujarat and the existing one in Chennai. Tata Motors is likely to hire and train a similar number of workers to upgrade its showrooms for a better buying experience.
HMSI, which has opened two new plants in two years and is planning one next year, is adding capacity at a pace faster than anybody else in the two-wheeler space. Its Gujarat plant, which is to come on stream in 2015-16 and likely to have a capacity of producing 1.2 million units, will create 3,000 jobs.
Mumbai-based Mahindra & Mahindra is opening a Rs 4,000-crore plant next year in Tamil Nadu, from where it plans to roll out all its new products - a compact SUV, a light truck and a new regular SUV.
However, the overall hiring scene is contingent on a strong demand pick-up. At present, nobody seems to be in a position to predict how the demand situation will pan out and the overall mood on this front seems quite dismal. SIAM says the industry will grow at a very moderate rate. PricewaterhouseCoopers predicts a sales growth of only three-four per cent this year, while Maruti Suzuki Chairman R C Bhargava expects it to be a mere three per cent.
Some optimists, though, are keeping their fingers crossed for a seven-eight per cent increase when the country's economy stabilises after the ongoing general elections. But there seems to be a big 'if' on that. PricewaterhouseCoopers Partner Abdul Majeed says: "Employment opportunities would completely depend on the demand situation. Even for original equipment manufacturers looking to bring fresh capacity on stream, utilisation levels would first have to improve at existing facilities." He points out that Ford India, which is to commence operations at its Gujarat facility later this year, is utilising only 66 per cent of the capacity at its Chennai factory. So, the question is, will it delay production at the new plant, especially when it has so much capacity at its existing plant? If it is so, it might mean putting hiring new workers on hold.
Deloitte Senior Director Kumar Kandaswami keeps a similar view: "The industry does not plan for the immediate period. It has to think about the next few years. Job creation will happen when expansion takes place."
Industry experts say the passenger car industry (excluding M&M, which declined to share its installed capacity, and some other small players) is saddled with an excess capacity of around 1,663,811 units. So, fresh hiring would entirely depend on demand revival. That's because the current capacity is nearly 60 per cent of the total automobile sales in 2013-14. So, it is possible many planned investments would be slowed down.
SIAM Director-General Vishnu Mathur points out that the total investment this year is not much different from that last year. "Last year, investments to the tune of Rs 20,000 crore were made in the automobile industry. Fresh investments in capacity building are unlikely this year. Investments in developing new products, refreshes, and research & development activities are an ongoing exercise that might continue despite a slowdown, but at the same level as last year."
The writing on the wall, therefore, seems clear: The possibility of the automobile industry hiring as many people as it has sacked will fully depend on whether consumers come in droves to buy vehicles.
