Auto companies ride job losses to slow electric vehicle push

The worst slowdown in the past two decades seems to have come as a blessing in disguise for the automotive industry.

While the automakers were fighting against electric vehicles, which was given a major push in the Union Budget, the continued fall in automotive sales during June and July helped them in putting their case with more strength.

“The OEMs through hectic lobbying and noise in the media successfully managed to put across that the automotive industry itself is under threat due to slowdown. It portrayed that instead of EVs, what it immediately needs is the bailout from the government,” claimed a Mumbai-based analyst.

Major automakers till recently were fighting tooth and nail against the “impractical” implementation of Niti Aayog's plans of making all the new three-wheelers and two-wheelers (up to 150cc) compulsorily electric by the year 2023 and 2025 respectively. A discussion, held in late June over the issue with Niti Ayog had turned into a heated debate as OEM executives questioned the logic of doing away with vehicles with internal combustion engine (ICE) in the next few years even though there being no infrastructure in place for electric vehicles.

However, the frequent headline news about 3.5 lakh job losses in the automobile industry since April and the spectre of 10 lakh lay-offs if things do not turn around put the government on the backfoot. The government hesitatingly putting the EV deadline on backburner even went to the extent of announcing steps for bailing out the industry, the experts said.

Union Minister of Road Transport and Highways Nitin Gadkari cleared the air that there will no ban on petrol and diesel vehicles in the country, adding that the government has not set any deadline for automakers to switch to electric vehicles. "I am the minister, Niti Aayog does not have the authority to set EV deadline," Gadkari was reported as saying.

According to Ashwin Patil, senior research analyst (auto sector) at LKP Securities, the compulsory conversion of the entire fleet of ICVs to EVs by the stipulated deadline is waived off, thus easing the urgency. “On the other hand, a well-thought and gradual setting up of EV infrastructure for the development of ancillaries/components including batteries for export can be done,” Patil said.

However, several trade unionists, industry analysts and experts DNA spoke to said that though there is not denying to the fact that the country is in the midst of a major economic slowdown, there are several of these companies who are in this situation due to their own poor handling of things.

The sceptics got a push in their arm after Rajiv Bajaj of Bajaj Auto recently reflected a different stand from those of its industry counterparts. Commenting on the development, Bajaj said that “fear-mongering” is not required, adding that a 5-7% drop in sales cannot be called as 'crisis'. "It's a doublespeak. Salary of employees is just 4% of sales, so is it justified to throw your employees for such small saving," Bajaj reportedly questioned the automotive fraternity.

Economist and former VP of Niti Ayog Arvind Panagaria was at his scathing best when in an op-ed column he recently said that it is a common tactic that large corporations in India have learnt to deploy effectively whenever they incur large losses is to impress upon the government that unless they are bailed out, the entire sector, even the whole economy, might run into deep trouble.