The pandemic-induced lockdown resulted in the shutting down of production at original equipment manufacturers (OEM). It also led to the disruption of the entire value chain of major industries in India, and therefore negatively affected the production of auto spare parts in micro, small and medium-sized industries. In addition, the reduction in consumer demand for passenger vehicles contributed to a loss in revenue and a severe liquidity crisis in the sector.

According to the Society of Indian Automobile Manufacturers, the sector registered negative growth in sales of all vehicle categories in the year 2021

Also, production cuts due to a slump in demand negatively impacted employment growth. According to the Parliamentary Panel report submitted to Rajya Sabha chairman M Venkaiah Naidu, the estimated job loss in the Indian automobile sector stood at 3.45 lakh. The largest carmaker Maruti Suzuki cut the temporary workforce by 6%, following the drop in car sales. The auto sector, which contributed more than 7% to India’s GDP, is now facing a severe contraction, with some automakers facing a year-on-year decline of more than 30% in recent months.

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