Explained: Why auto sector slowdown may leave Pune's industrial hub reeling

New Delhi, Sep 09: Automobile sales in India witnessed its worst-ever drop in August with despatches in all segments, including passenger vehicles and two-wheelers, continuing to plummet as the sector reels under an unprecedented downturn, industry body SIAM reported on Monday. The order down by 20%, the economic slowdown is not new for nearly 14,000 small and medium-scale industries, but it is now a question of survival for these units that are located in the industrial landscape of Pune and Pimpri-Chinchwad.

All these companies are in an adverse situation, they collectively employ nearly 5 lakh workers. Many of them are also facing the unenviable option of either laying off their workforce or downing their shutters.

According to Pimpri Chinchwad Small Scale Industries Association, about 12,000 small and medium industries depending on original equipment manufacturers (OEMs) are facing a major crisis with work orders dropping by 25-30 percent.

The areas of Pune, Pimpri Chinchwad, Chakra-Talegaon, Ranjangaon and other industrial zones of that are heavily dependent on the automobile original equipment manufacturers (OEMs), which have been operating for several decades.

Tata Motors, Bajaj, Volkswagen, Mercedes Benz, and Mahindra and Mahindra are some vehicle manufacturers whose plants have acted as catalysts for the growth of subsequent business.

The manufacturers or as we say the auto OEMs, have helped to lead the growth of many entrepreneurs through their vendors and sub-vendors.

These entrepreneurs started their journey due to the conducive environment here, which involved the availability of quality manpower and ready business. Over time, they started sub-contracting work to others, thus completing the value chain.

Gradually, work is drying up for contract labourers, as they don't feel safe and secured in the workplace that permanent workers do. While the exact number of such labourers is hard to ascertain, these workers are increasingly facing the prospect of unemployment as even their contractors are finding it difficult to get work.

For the industrial units, the bigger worry is repaying their bank loans and avoid being labelled as a non-performing asset. Between bank loans and establishment costs, the smaller scales may find it prudent to shut down, in case the slowdown continues.