Firms see disruption if China shutdown lasts
■ Suzuki Motor looks outside China for components
Manufacturing activity in India across industries may get stuck if closure of factories in China gets extended beyond a week. Suzuki Motor Corp, parent of India’s largest carmaker Maruti Suzuki, has already declared that virus infection in China threatens to disrupt vehicle production in India.
Consumer durable-makers, who source most products from China, are also concerned. And so do tyre and drug companies. “As of now we hear that units (in China) might get opened by February 10. But if this gets extended, manufacturing might get affected across sectors, as China is the main component provider for most of the products. Even if units in China resume production, we do not know how fast they will be able to scale up to their peak production levels. In that case, there could be a lag effect on our manufacturing,” said Kamal Nandi, president of Consumer Electronics and Appliances Manufacturers Association.
Suzuki said that it is bracing for disruption in production and supply chain, and is looking for sourcing vehicle components from outside China. However, industry insiders find that sourcing from alternate markets may not be an immediate solution. Suzuki does not produce or sell any cars in China, but procures components for its plants in India. Other automakers, like Toyota Motor Corp and Fiat Chrysler Automobiles are also reportedly staring at a disruption.
Consumer durables and appliances are heavily dependent on China for their components as some brands just assemble the imported parts in India. For electronic components, television panels, LED chips, compressors for refrigerators and airconditioners as well as motors for almost all the products and brands are dependent on China. Consumer durables, especially fridges and ACs, are already into their biggest season sales in summer.
“Most of us currently have enough inventory for March sales. But Chinese companies have already lost one week of production. If it prolongs, sales during the peak season of April, May and June can get disrupted,” said B Thiagarajan, joint managing director of Bluestar.
In the tyre industry, 15 to
40 per cent of the raw materials are being shipped from China. These include synthetic rubber, carbon black, chemicals, nylon tyre coat fabric.
“There is no alarm as yet because the Indian domestic consumption is not looking up. Have we been in our peak production, there would have been an imbalance. However, if the product-halt in China continues till end of February or mid-March, we will definitely see disruption,” said Rajiv Budhraja, director general, Automotive Tyre Manufacturers Association.
Drug manufacturers get active pharmaceutical ingredients (APIs) from China for their formulations. Usually they stock raw materials for a month. But the lag effect of the closed days will remain in the supply chain.
“We are unable to assess the magnitude of impact. We are dependent on the
$4 billion imported APIs from China. Formulation supply will get affected if the closure prolongs,” said S. V. Veeramani, past president of the Indian Drugs Manufacturers Association.