Facing sales slump, market leader Maruti Suzuki slashes 3,000 contract jobs

Maruti Suzuki has not renewed the contracts of 3,000 temporary employees across its manufacturing plants, chairman RC Bhargava said on Tuesday, as the company has been cutting production since February this year to control inventory pile-up amid a slowdown in demand.

Bhargava said over the past year, multiple factors led to an increase in final cost of cars, affecting their affordability. “Safety norms, increase in insurance prices and higher taxes have added substantially to the cost of cars,” Bhargava told shareholders at the company’s 38th annual general meeting.

He blamed the state governments for the current slowdown in auto sales, saying growth of the manufacturing sector and the economy is not entirely the responsibility of the central government. Bhargava said while the new safety norms and insurance costs impacted demand, a significant impact was due to nine states increasing road states by a substantial amount. “In all these nine states, there was a sharper dip in sales compared to others,” he said, adding state governments have a lot more to do with the increase in the vehicle’s cost of ownership.

“It’s time when states also partner to help the manufacturing sector grow… and achieve the 25% contribution from sector,” Bhargava told shareholders, adding the central government has partly done what it could do to revive demand.

On Friday, the central government announced lifting the ban on purchase of new vehicles by government departments and allowed auto buyers enhanced depreciation of 30%. A proposed increase in one-time registration fee was also deferred to June 2020, a move praised by the industry executives who said this would propel demand.

On electric vehicles, Bhargava believes low cost or affordable electric cars for individual customers cannot be made available in the next few years as the technology to counter range anxiety and inadequate charging infrastructure will remain a barrier in the near term.

Bhargava said the advancement of technology for electric mobility in India is not as rapid as one would have thought it to be. “For an individual customer, who is a low-cost small car user, the availability of affordable electric car which meets his requirement of range and charging is not likely to happen in the next few years.”

Stating that the number of electric cars in the market are minute, the chairman of the country’s largest carmaker said even government officials using them currently are finding limited acceptance.

His comments came after several government officials using electric cars from Tata Motors and Mahindra & Mahindra (M&M) complained of lower range and poor performance. The officials said while the companies claimed a range of 130 km when fully charged, they were able to do just about 85 km.