The Indian auto industry has already seen significant job losses and the extended lockdown is only making matters worse, said Rajiv Bajaj, Managing Director of Bajaj Auto. On Tuesday Bajaj came out to sharply criticize the government’s lockdown strategy and described it as a “solution looking for a problem”.
“Lockdown is not the long term answer to the health crisis. The young and healthy need to go back to work. The lockdown is arbitrary and not an answer to the economic crisis either. I think job losses have already happened. You just have to speak to suppliers and dealers. The government is pretending as if there are no job losses and no salary cuts”, said Bajaj.
Bajaj also said the company has started taking major cost reduction measures. “Our marketing budget used to be Rs 200 crore a quarter, this time it is virtually zero. We have also frozen our capital expenditure almost entirely barring R&D”, he said. The industry veteran also predicted that investment plans would be on hold for at least one year.
The company recently announced that it would be reducing the salaries of employees for the period of the lockdown. The company had said its employees had volunteered to take pay cuts due to the unprecedented situation. Bajaj said that the company was not just reviewing employee wages but the entire spectrum of benefits.
“Our HR has worked out a plan to save Rs 150-200 crores annually, which we will implement. We are tightening everything. We need to secure the ship”, he said. The Society of Indian Automobile Manufacturers has requested the government for relief measures to boost demand and liquidity. The industry body has called for a temporary GST reduction and availability of working capital at concessional rates. Bajaj rejected such demands but hoped that the government would act logically and sensibly.
“Please start the front end, the ports for exports and dealership. Then work on smoothening transportation of goods and then work backwards and allow us to start our plants with all due precautions”.
Bajaj confirmed that the company had received permission to restart its Pantnagar plant but said there are difficulties in resuming production. “Production is an issue in terms of access for employees and supplies and what is the point of producing if dealerships are shut”, he said.
He added that demand will come rushing back post lockdown as there is pent up demand in the system and there would be greater demand for personal affordable transport due to COVID-19.
“KTM is expecting 30-40 percent higher demand for powered two-wheelers compared to the situation before this crisis. KTM does not want 11,000 two wheelers as they wanted earlier, they now want 16000 KTMs and Husqvarna’s but our plant is shut”.
Bajaj urged governments to scrap rules according to which a dealership or factory could be sealed for three months if an employee is infected with COVID-19. “This is a draconian move and is preposterous. We will take every precaution and you can inspect premises every day. Do not hang this sword on people. How will people open up”, he said.
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