After a washout month, automobile industry seeks resumption of business

Auto sales are a primary barometer of the country’s economic health and experts say that prolonged closure will threaten jobs and expand the magnitude of effort required to restart the economic engine, post the pandemic health crisis.
Indian auto companies sold no cars in the month of April - a first in history as a nationwide lockdown kept factories and showrooms shut preventing any sales.

 
Auto sales are a primary barometer of the country’s economic health and experts say that prolonged closure will threaten jobs and expand the magnitude of effort required to restart the economic engine, post the pandemic health crisis. The sector contributes 7 per cent of India’s total Gross Domestic Product (GDP).

 
The worsening problem forced three industry bodies of carmakers, (SIAM), auto dealers (FADA) and auto component makers (ACMA) to make a joint representation to resume operations in all zones irrespective of red, orange and green. Their contention is that it is impossible to start manufacturing with partial reopening.

“Automotive value chain is highly complex and integrated. A vehicle manufacturer cannot commence production if any of its component supplier is shut. Further if dealerships are closed, production in isolation wull only mean increased inventory and blocking working capital,” the joint letter to the secretary of home ministry said.

 
Companies, however did dispatch some units as export and executives say they are waiting for further directives on the reopening of plants.

 
“Maruti had zero sales in the domestic market in April 2020. This was because in compliance with the government orders, all production facilities were closed," India’s largest carmaker said on Friday. However, Maruti exported 632 vehicles from Mundra port following the resumption of port operations. This was also its first shipment since the lockdown.

Mumbai-based Mahindra & Mahindra M&M said its exports were at 733 units during last month. Veejay Nakra, chief executive officer (CEO), automotive division, M&M said the company is closely working with all its stakeholders, including component suppliers, vendors and dealer partners, to get the ecosystem started as soon as the lockdown ends.

 
“We are hopeful that our dealerships will open soon and have stocks to cover the first few weeks of sale," said Nakra.

 
Analysts said that even after the lockdown ends, recovery for the sector will be very slow as the economic sentiment will be poor. “Given the early trends, we are yet not as sure of how the recovery will vary by region and by area Even if we recover from the coronavirus pandemic, the economic impact is bound to cause ripples for months to come. In addition, the severe hit to the tourism sector and fall in foreign remittances will potentially have an adverse effect on the economies,” analysts at Dolat Capital said.

 
Analysts feel that rural volume may outpace urban, as the lockdown will be extended in cities, which are the epicentre of the virus.

 


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