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Layoffs at auto dealerships as dealers forced to cut costs amid bludgeoning demand

Layoffs at auto dealerships as dealers forced to cut costs amid bludgeoning demand

Layoffs at auto dealerships as dealers forced to cut costs amid bludgeoning demand
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By Alisha Sachdev  Aug 3, 2019 5:23:52 PM IST (Published)

There is a human side to the slowdown in the auto industry.  As demand for automobiles continues to fall month after month, with monthly sales numbers for July hitting their worst ever levels in two decades, all stakeholders are bearing the costs, but it is dealerships which are hit the hardest.

There is a human side to the slowdown in the auto industry.  As demand for automobiles continues to fall month after month, with monthly sales numbers for July hitting their worst ever levels in two decades, all stakeholders are bearing the costs, but it is dealerships which are hit the hardest.

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CNBC-TV18 spoke to some of the most prominent dealerships in the country, with employee headcount ranging from 300 to 5000, and learnt that auto dealers have cut manpower by up to 15 percent on average across levels, especially in the last three months, in the face of demand refusing to pick up.
Auto dealers are now taking a hard look at their costs, and are focusing on maximizing efficiency, becoming more process-oriented and rationalizing headcount, which along with interest payments, is a major cost for them.
While dealers aren't expecting the festive season to work miracles, they do expect it to lift sentiment among buyers. However, if there's no turnaround along expected lines, more jobs might be on the line in January, once the busy October - December period ends.
Lay-offs at dealerships are affecting crucial front-end staff the most. Some dealers we spoke to reported a 25-30 percent reduction in sales executives in dealership outlets.
Services technicians come close second. As demand for after-sales services goes down corresponding to the slowdown in new car sales, workshop staff like accessory fitters, PDI (pre-delivery inspection) staff are also being made redundant.
Matters are particularly sensitive for smaller dealership outlets in the rural areas, especially rural Maharashtra and the Southern states which have been hit by a drought, as operating in the face of zero to single-digit sales has now become a matter of survival.
Over the last 18 months, more than 270 dealers shut shop due to a variety of reasons, but poor demand and liquidity constraints have made business unviable for many players who relied on high borrowing.
However, for dealers who have lesser borrowing exposure, there haven’t been layoffs yet– but there’s the consideration to do so if there’s no pickup after the festive season.
Across geographies and sizes, dealers are conducting internal evaluations to rationalise processes and remove non-performers. And as used to be the case earlier, the non-performers aren’t being replaced by new staff.
"On average there’s been a reduction of around 12-15 percent in headcount at dealerships across the country, while this number is significantly higher in some Western and Southern states", Nikunj Sanghi, president, Automotive Skill Development Council, told CNBC-TV18.
"Sales staff also needs to be trained, we cannot hire novices", he added. When asked if there is a possibility of the laid-off staff being re-hired, he said that dealers are likely to incentivise their existing staff during the festive season, instead of bringing new people on board.
In July, Nissan India reported cutting over 1700 jobs in India, following poor sales and dwindling demand.
Ancillary parts makers' bodies, ACMA, too has warned of job losses to the extent of a million if the industry is not provided an immediate stimulus.
The auto sector traditionally employs millions of people, and contributes significantly to the country's manufacturing GDP. With the prolonged slowdown refusing to turn around, poor sales are now reflecting on peoples' livelihoods - both at dealerships, where they're losing jobs and outside, where unemployment and stagnant growth trajectories have been weighing down sentiment.
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