Coronavirus pandemic and the subsequent lockdown have created many firsts for humanity
While there are definite signs of earth healing itself, things are getting from bad to worse for many industry sectors. One of the worst hit is auto sector, which will be registering almost zero sales in April 2020. This will be a first for the industry and its repercussions will be felt on the nation’s economy as well.
The auto sector employs more than 40 million people (direct and indirect) and contributes around 8 percent to the nation’s GDP. Around 15% of the government’s tax kitty also comes from auto sector. The lockdown has not only impacted automakers, but also other entities in the ecosystem including dealerships and auto component manufacturers.
Excluding a few units that may have been sold via online platforms / existing stock at dealers, auto sales will be close to the zero mark in April. The situation may not improve in May, as the lockdown is unlikely to be eased completely. There are hints that the lockdown may be extended in coronavirus hotspots. Moreover, industry leaders say that even if the lockdown is removed, it will take some time to start operations.
As of now, some auto manufacturing facilities that are not located inside Covid-19 hotspots have been allowed to function. However, these plants are yet to start operations, as the ecosystem of dealers, suppliers and financiers is still not functional. Provided that the lockdown ends on May 3, automakers will be able to start partial production by mid-May.
If the lockdown is not removed across the country, auto companies will continue to face supply-chain issues. Many automakers are located in cities such as Chennai, Gurgaon-Manesar and Pune, which are experiencing high rates of Covid-19 infection. It is unlikely that lockdown will be eased at such locations after May 3. Auto component manufacturers in Maharashtra, Karnataka, Telangana, Tamil Nadu and Uttar Pradesh also need to be functional to bring normalcy in the auto sector.
Due to coronavirus, automakers are also thinking new strategies that would be useful in post Covid-19 situation. For example, TVS Motors chairman Venu Srinivasan said that the industry can do better by deploying just-in-time manufacturing, as practised by Japanese companies. This will reduce operation costs by keeping a lean inventory. Venu also recommended increased reliance on suppliers in a 20 kilometre radius. This will reduce the risk of supply chain disruptions.
Safety of employees is another thing that has become extremely important in the current situation. Most auto companies now have, or are planning to have dedicated systems and protocols that will help keep employees safe from Covid-19.