Amongst global businesses, the automotive industry faced some of the worst blows due to COVID-19. In India, the pandemic has brought down several automotive and related companies to a near-standstill as dealerships and factories continue to stay closed.
Owing to India’s lockdown protocols, domestic automotive sales in April 2020 hit zero units except for a small number of online units. In the past couple of weeks, quite a few OEMs have shifted focus to online retail platforms.
To prevent further losses, key players of the industry has written to concerned authorities seeking a complete exemption from COVID-19 lockdown protocols, in order to resume all operations coming under the value chain. In other words, the industry wishes to open all vehicle manufacturing facilities and dealerships across major segments simultaneously. Experts predict that the entire vehicle-buying scenario will take a shift even after the lockdown is lifted — read more details.
In a letter addressed to Ajay Kumar Bhalla, Home Secretary of India, it is clearly mentioned that the “automotive value chain is complex, integrated” as well as “interdependent”. It further states that an automaker cannot do business efficiently even if just one of its suppliers fail to operate. The letter was a joint effort from three Indian automotive organisations: SIAM (Society of Indian Automobile Manufacturers), ACMA (Automotive Component Manufacturers Association) and FADA (Federation of Automobile Dealers Association).
As of now, the nationwide lockdown extends till May 17 and depending on the days to come, the country might even see a fourth phase of extension. If manufacturers are allowed to commence operation at their factories while dealerships remain closed, it would result in an overwhelming inventory and block the working capital. Hence, for the industry to work effectively, almost every player in the field of vehicle sales have to work in conjunction.
Data shows that the automotive industry accounts for 7% of the nation’s GDP, 49% of manufacturing GDP and 15% of GST. In addition to this, it employs more than thirty-five million people directly or indirectly. Due to the lockdown, the Indian automotive market is reportedly witnessing losses of around Rs 2,300 crore daily.
India’s automotive field has shifted to BS6 emission norms but several dealerships are burdened with unsold BS4 stock. Such dealerships have been advised to follow one of three options: (1) register the BS4 vehicles as used, (2) consult the OEM for a buyback, or (3) send the cars for scrappage.