Allow entire value chain to resume ops: Auto industry

In a first, automakers in India reported zero domestic car sales in a month as factories and showrooms across the country remained shut for the entirety of April amid the ongoing lockdown. Companies, however, did manage to dispatch some units for exports.

Auto sales are a barometer of the country’s economic health and experts say that prolonged closure will lead to job losses and expand the magnitude of effort required to restart the growth engine post the Covid-19 health crisis. The sector contributes 7 per cent to India’s gross domestic product (GDP).

The worsening situation has forced three industry bodies of carmakers — Society of Indian Automobile Manufacturers, Federation of Automobile Dealers Associations, and Automotive Component Manufacturers Association— to make a joint representation to government to resume activities related to auto manufacturing in all zones. They contended that would be impossible to resume manufacturing with a partial reopening,

“The automotive value chain is highly complex and integrated. A vehicle manufacturer cannot commence production if any of its component suppliers is shut. Further, if dealerships are closed, production in isolation will only mean increased inventory and blocking working capital,” stated the joint letter to the secretary of the home ministry. “Maruti Suzuki had zero sales in the domestic market in April. This was because, in compliance with the government orders, all production facilities were closed,” India’s largest car

maker said on Friday. The company exported 632 vehicles from Mundra port following the resumption of port operations. This was its first shipment since the lockdown.

Mumbai-based Mahindra & Mahindra (M&M) said its April exports were at 733 units. Veejay Nakra, chief executive officer, automotive division, M&M, said the company is closely working with 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 sales,” said Nakra.

Analysts said even after lifting of the lockdown, the recovery in the sector will be slow as the economic sentiment is poor. “Given the early trends, we are not yet sure of how the recovery will vary among regions, even if we recover from the Covid-19 pandemic. The economic impact (of the lockdown) is bound to cause ripples for months to come,” noted analysts at Dolat Capital.