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Auto pay hikes to hit superhighway (View Comments)
Nandini Sen Gupta
Posted On Monday, February 01, 2010 at 11:46:25 AM
Salary Increases May Double As Industry Rides Domestic Demand
The automobile industry has held steady on the growth track in India, and both hiring and salary hikes are likely to nearly double this year, riding on domestic demand and economic recovery.
With the economic slowdown eating into growth last year, salary increases averaged 5-7%. This year, that count is all set to hit anywhere between 10% and 12%, taking the effective top end for high-fliers to 16-17%.
The global slowdown did not bite companies in India too hard, though, and hiring continued on domestic demand for cars, SUVs and motorcycles. With the recovery kicking in, the situation can only get better.
The industry’s fortunes have been helped by market leaders Maruti Suzuki (cars), Hero Honda (motorcycles) and Mahindra & Mahindra (utility vehicles) notching up good growth. “Maruti took a long-term perspective on people strategies during the downturn so we didn’t disturb salaries. Now with a strong recovery, our compensation packages will be aligned to the market and the performance of the company,” says SY Siddiqui, MEO (administration, HR, IT & finance).
The company, he says, will take a call in June on the new structures but “it will be a strong double-digit figure very competitive over last year and the overall market.”
Maruti was an exception with its 9.5% average wage hikes last year. This year, that should go up to around 11-12% on an average, which means the high-fliers can expect around 16-17% or more though the laggards could be stuck with last year’s industry average of around 6%, according to automobile industry experts. Maruti also added 725 people to its roster last year; this year, the figure will go up to around 940.
Like Maruti, M&M too is looking to “significantly improve” the payout this year said Rajeev Dubey, president-HR, aftermarket and corporate services. “Last year, it was subdued, and in line with the industry average of 6-8%.”
M&M will finalise its wage plans by August. “Hiring last year was not as intense as it will be now as the economic environment is emphatically better. Salaries will also be on the higher side this time around,” Mr Dubey said.
M&M is developing a new product as a successor to the Scorpio, which will attract fresh capex of around Rs 600-700 crore. In the third quarter, the group saw its sales jump 58% year on year.
The story is no different with two-wheelers. Market leader Hero Honda continued hiring right through the downturn, thanks to its new plant in Haridwar. This year too, the hiring will continue at all levels — graduate trainees, management trainees and lateral h- ires, says Anadi Pande, VP corporate strategy and human resource management, Hero Honda. “Although I don’t see the kind of salary increases that the four-wheeler industry will offer in the two-wheeler business, there will be significant improvement,” he adds.
Riding on good demand right through the downturn, Hero Honda offered 9-10% salary hikes on an average last year. It will likely look for a new plant sometime in 2010 or 2011, which will mean fresh hiring as well. “For now, we have to m- anage growth and the attrition levels which are coming back to pre-downturn levels,” says Mr Pande.
Although India’s automobile industry, with the exception of truck and bus makers, escaped the intensity of the downturn, salaries will not skyrocket just yet. The downturn has built in enough caution to do just enough to reward and retain high fliers but not go overboard with hikes.
Also, with global demand kicking in, the component industry is stepping on the gas. Says VC Sehgal, chairman, Samvardhana Motherson Group: “We hired around 900 fresh engineers last year and this year, we will do better than that. With our order books are full, we need to step on the gas in terms of manpower. Compensation too will be along those lines.”
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