Slowdown is here to stay: After Maruti, M&M lays off temporary staff

The slowdown in the economy and sluggish car sales is now costing jobs in the auto sector.

Just days after India's largest car manufacturer Maruti Suzuki announced that it had laid off 400 contract workers citing slowdown, home -grown auto maker Mahindra and Mahindra has axed 500 temporary workers at its Chakan plant and put a freeze on hiring for now.

The company declined to renew the employees' contract who were mainly employed at the company's logistics and support division, according to this report.

[embedalsosee]

Sluggish sales have resulted in rising inventory levels in the past few months across company stockyards and dealers.

Last week, Mahindra announced production holidays of one to eight days to avoid inventory pile-up and align production with retail demand.

More from Business

The Mahindra XUV[/caption]

"We have reduced 500 temporary workers from across our plants due to the prevailing situation within the auto industry," Mahindra said in a press release.

"We have not yet taken any call on delaying investments but if the current situation prevails we may have to."

However, a report in the Business Standard said the company hassignalled that the Rs 5,000 crore capital expenditure lined up for this year and next two years may get postponed by 1-2 years as existing capacities will take more time to reach peak levels.

In an interview with CNBC-TV18, Pawan Goenka, president automotive at M&M said, "The biggest thing for M&M, specifically is a 30 percent excise duty because most of our passenger vehicle segment, in fact the big volume segment like Bolero, Xylo, Scorpio, XUV, are affected by that and we have to find a solution for it. We already have done that for XUV now where we have reduced the down clearance and now we fall in 27 percent excise duty. We are looking right now whether we should do it for other products also. So, that will at least take us to the pre-budget level."

Earlier this month, Maruti Suzuki said that production at its Gurgaon and Manesar plants in June 2013 was lower by 25 percent (2,466 units per day) compared to the same month last year. Maruti is producing about 40 percent less than its maximum capacity of 4,400 units a day across both its facilities.

Even Tata Motors has cutproduction of the Nano at the Sanand plant by over 80 percent this year, and for other vehicles at the Pune plant by 30-40 percent.

Car sales in India fell 9% in June as demand continued to suffer due to rising ownership costs and sluggish economic growth.