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One of India's largest automobile manufacturers, (M&M) Mahindra and Mahindra announced plans for deferring of investments, and also said they would be cutting 1,500 jobs this financial year, thanks to the auto industry's prolonged negative growth, according to the International Business Times.
Pawan Goenka, Managing Director, Mahindra and Mahindra, said, "About 15%-20% of capex from our original capex plan could be deferred. However, the suspension will not affect new product development plans or any other capex meant for bringing the right products to the customers."
Mr Goenka also said that roughly 1,500 temporary workers were retrenched since April 1, 2019, and also warned of further cutbacks if the slowdown continues.
According to the director, more job losses are expected to take place at supplier and dealer levels when compared to (OEM) original equipment manufacturers. He said that a fund raiser package and a fiscal stimulus package from the government during the festive season was an important step to achieve a turnaround in jobs and investments in the auto sector.
When asked about the previous slowdown where the government stepped in to help, Mr Goenka said, "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."
India's auto crisis has worsened after sales of vehicles dropped 18.71 percent in July - making it the worst slowdown in the sector's sales in 19 years. According to research data by (SIAM) the Society of Indian Automobile Manufacturers, over 15,000 jobs have been cut over the last two to three months.
They also said that costs of owning vehicles has gone up because of increase in fuel prices, interest rates, vehicle insurance and unsold inventory because of the heavy rains all over the country.
In addition, Mr Goenka also spoke about the status at the opening ceremony of Mahindra Ideal Lanka Pvt. Ltd assembly plant on Saturday. The assembly plant is a joint venture between Mahindra and Sri Lanka based Ideal Motors, and is located at Welipenna near Colombo.
The company also launched its first product, the KUV 100 petrol K6+ variant, in Sri Lanka and plans to launch other variants in the future. The SUV is priced at Sri Lankan Rupee 3.2 Million which is roughly Rs 12.85 lakh.
Mr Goenka said at the launch, "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."
Thoughts About The Job Cuts At Mahindra
We know things are really bad if Mahindra starts cutting jobs. The auto industry says this is the worst crisis in close to two decades and we have to agree with them. Our primary questions are what is the Indian government doing? And why are they taking this long to find a solution to a crisis that is leading to a major economic slowdown and unemployment?