Automaker Maruti Suzuki has cut 3,000 contract jobs as it battles rising inventory along with slowing demand in the Indian market, its Chairperson RC Bhargava said on Tuesday, Reuters reported. Bhargava told shareholders at the company’s annual general meeting that new safety norms and higher taxes have “added substantially” to the cost of manufacturing cars.

Bhargava said the company is on track to meet India’s new emission norms and will move to producing compressed natural gas and hybrid cars soon. He added that Maruti Suzuki plans to increase CNG vehicles by 50% this year.

India’s automobile sector sales declined for the ninth straight month in July – the worst decline since December 2000. Passenger vehicle sales fell 30.9% in July over the same month last year, while car sales declined 35.95%. The overall downturn in the market stood at 19%.

Maruti Suzuki is looking at the CNG option to fill the space vacated by small diesel engine cars, whose sales will stop in April 2020, PTI reported on Monday. The Indian government had earlier announced that BS-VI emission norms will become applicable in the domestic market by April 2020. At present, around 23% of all cars sold by Maruti Suzuki in the domestic market run on diesel.

“We believe that for a small car, CNG is a very good option,” Maruti Suzuki India Senior Executive Director (Engineering) CV Raman told PTI. “It is an alternative to oil consumption. We have the widest range of CNG cars for our customers. We are keen to promote green fuels.”

The company sold 4,74,487 units in the April-July 2019 period, compared to 6,17,990 units in the same period a year ago, a decline of 23.2% in sales. Maruti Suzuki has also sold over 5 lakh CNG vehicles so far.

A slowdown

The automobile industry is facing a crisis, with 15,000 jobs having been cut in the sector in the last quarter and almost 300 dealerships having been closed down in the last 18 months. The decline in consumer confidence, coupled with the crisis in non-banking Finance Companies, have caused a steep fall in passenger car sales.

With BS-VI emission norms coming into effect soon, prices of vehicles have also gone up since car manufacturers have to upgrade their products to meet the new norms. Manufacturers of two-wheelers are also looking at a compulsory upgrade of three-wheelers to battery-powered vehicles by 2023. Two-wheelers have to complete the upgrade by 2025. This will cause prices to shoot up.

Society of Indian Automobile Manufacturers Director General Vishnu Mathur had said that the current downturn is not a purely cyclical one since “cycles don’t last this long”. “Something else has also failed,” he had said.

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