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Thursday, June 04, 2020

Auto sector slowdown: Dependent on Tata Motors, small-scale unit fights for survival

In Pimpri-Chinchwad, over 5,000 small-scale industrial units and sub-vendors make auto parts for Tata Motors.

Written by MANOJ MORE | Pune | Updated: August 29, 2019 10:42:42 am
Dependent on Tata Motors, small-scale unit fights for survival Abhay Bhor

The slowdown in the auto sector has not only hit many of the major players, its ripple effect has also affected the business of many small-scale industrial (SSI) units, putting a question mark on their very survival.

One of them is Bhor Rubber Products, which is also among the oldest such units in Pimpri-Chinchwad. The company makes auto parts and supplies them in bulk to Tata Motors every month. The industrial unit with 15 employees also outsources the manufacturing of the final product’s smaller parts to 20 other sub-vendors.

But the current condition of Bhor Rubber Products reflects the bleak reality of the industrial belt, as the unit’s orders from Tata Motors, one of its main customers, have dwindled.

“We have 20 vendors… the sub-vendors must have 20 or more employees. So, along with our SSI, there are probably 300-400 employees connected to the product who depend on Tata Motors for work,” said Abhay Bhor, who is also the president of the Forum for Small Scale Industries Association.

The business was set up by Bhor’s father, Sopanrao Bhor, more than four decades ago.

In Maharashtra, over 1 lakh such vendors and sub-vendors, as well as lakhs of employees, depend on Tata Motors for their business. In Pimpri-Chinchwad, nearly 5,000 small-scale industrial units and their sub-vendors make auto parts for Tata Motors.

Pointing out the ‘starter motor’, which is made at his unit, Bhor said, “It is a vital part, without which the vehicle can’t get into motion. We used to make at least 1,000 such parts every month. These parts are used in diesel vehicles. However, as the production of Tata Motors’ diesel vehicles has come to a standstill, we have stopped making starter motors,” said Bhor.

The company’s troubles began in May, said Bhor. “The orders first came down to half and now have dwindled to less than 25 per cent. The slowdown seems to have become severe in the last three months,” he said.

Unlike other small-scale industrial units in Pimpri-Chinchwad, which are completely dependent on Tata Motors, Bhor Rubber Products, with a turnover of over Rs 1 crore, has other sources of business.

“Though our business is down, we have not been hit as badly as other SSIs, whose business is completely dependent on Tata Motors. We cater to other big industries also. And that’s the reason why we have not laid off employees or slashed their salaries. In view of the upcoming festive season, we have taken a humane view and decided to operate on a tight budget,” he said.

The condition of a few of the SSIs was much worse, said Bhor. “If the situation doesn’t improve or the government does not come up with a strong stimulus package for the auto sector, these small units will be the first ones to collapse,” he said.

However, Bhor said there was a feeling of cautious optimism among the SSIs, which believed that the current difficult stretch would not last too long.

“This has happened in the past as well… we believe that things will soon start looking up, with the government showing its intent to provide the necessary help,” he said.

Tata Motors is observing a block closure from August 28 to 31, its second this month. As many as 4,500 workers will have to sit at home during the four-day closure period.

In a statement, the company said, “Tata Motors believes that the current challenging market situation is likely to improve gradually in the coming months with the onset of the festive season. We welcome the comprehensive set of actions laid out by the government and believe that the measures to improve liquidity, drive growth and reduce cost of ownership of the vehicles, will help the industry get back on track. In the meanwhile, we will remain focused on retail acceleration, reducing dealer stock levels, a smooth transition to BS VI and driving our turnaround plans.”

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