This hiring season, this sector is one area you don’t want to miss out on!

In the sector-wise coverage following the recent Aon-Hewitt Salary increase report for this year, next up is the automobile industry!

While speaking to Amit Kumar Otwani - Sr. Consultant, Rewards, Aon Hewitt – we tried to understand how this key industry is moving forward in terms of its competitiveness, salary increments to employees, pay differentiation etc in the past couple of years, and what these would look like in future.

“If I look at the industry growth for last 6 years, it stood at 20% and 12% in the first two years, saw a flat growth rate of 2 to 3% thereafter, and in the next two years (2014-16) came back to roughly an 8-9%. The salary increases has also seen a rise with the rise in growth rate. In 2010-11, salary increases were roughly at 14%, it went down to 12.3% and then picked up again to reach a 10.1%. In the last couple of years it has shown stability by hovering around 10.5 %, close to the India average of 10.3%,” he says.

Highlighting some of the happenings in the industry as of now and correlating these numbers, Amit says that controlling rising cost of infrastructure and R&D could be a major challenge for the auto industry in the times to come.

“Companies are increasingly investing in product development following stricter environmental norms. It is leading to a huge technical upgradation and therefore more investments. Remember, Supreme Court of India has ordered auto OEMs to produce vehicles which will comply to BS-VI norms by April 2020. This can put a lot of pressure on the auto industry to have cleaner vehicles in the times to come,” he says.

Another challenge which has been discussed a lot is the demand for cars coming down due to the emergence of Olas and Ubers. However, for it to be a major-time threat there’s still a long way to go.

Increasing wage costs, however, is a concern that can’t be taken lightly.

“The wage cost used to be in a range of 3-5%, however, with double digit increase and also the revenue growth of the industry being slightly muted, the wage cost has moved in the range of 5-6%. This is putting a lot of pressure on the industry to control the salary increases. Moreover, if we compare it some other countries, say Indonesia, wage costs are much lower there,” says Amit.

“Precisely, why we are not seeing it go up any further in India too. It’s also highly unlikely that it will go up or down in the next few years. What we expect is it will remain closely in the range of 10% because this is a new normal we are observing and companies don’t want to keep higher incremental next year in view of the wage cost factor and in order to stay competitive,” he adds.

He also informs that comparing pay compensation and adjusting purchasing power parity, India has reached slightly lower mark compared to the global/emerging marketers in terms of senior management. However, he adds that at the entry level, “India is paying as much as some of the emerging countries.”

“The cost advantage which auto industry, therefore, enjoys is coming into a check and therefore companies are cautiously providing salary increases which has contributed in achieving this new normal,” he says.

Now speaking of talent attrition, the numbers have come down from 10-12% to 9-10% in the auto industry like in the other sectors. The reason for this dip is lack of opportunities in the sector for a couple of years now; however, Amit says looking at the uptake in the last one year, this number could go up.

“There is lot of thrust from the government’s end to upscale the entire auto industry. With that some of the key companies are also investing in India. Moreover, R&D institutes (by HeroMotorCorp and others) are likely to come up soon. So, I see the attrition going up in R&D and Sales and Marketing in the coming times,” he says.

Another key area which needs focus is the pay differentiation. It’s 1.5 to 1.6 times in terms of salary increases in the auto sector this year. “Compared to the likes of FMCG, Telecom, Banking, this number is lower in the auto sector because it’s been slightly traditional. What we recommend is that the differentiation should be sharper because of the overall pay-for-performance culture. Auto industry needs to catch up with respect to other industries in this regard,” says Amit.

He also sees employees in Sales, purchase, Engineering and electronics moving to startups or e-commerce. “The auto industry is innovating itself and there is a lot of focus on electronics. This is an area where it could compete with early stage startups. Therefore, people in sales, purchase, engineering and electronics could probably get attracted to some of the early stage startups,” Amit Says, adding that overall auto industry does not have a huge threat in terms of losing its key talent to the new startups or e-commerce industry.

Even as global players have already made their mark in India, Amit says as he concludes, “there could be newer players in the luxury car or motorbike segment in the future, this could as a result greater war for talent.”