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Auto industry bounces back to life in China – How India can follow

Despite being the epicentre, China is recovering from COVID-19 and its aftermath at a surprising pace

All around the world, nations are going through tough times like never before due to COVID-19. The pandemic spread its impact beyond the health of mankind and brought several businesses to a near standstill. While global powers are gradually recovering from the outbreak or employing safe strategies to move along with it, certain core industries are expected to remain in a state of struggle for a considerable amount of time.

The Indian automotive market was hit so badly that domestic sales in April 2020 plummeted to zero units – for the first time in history. Plant shutdowns, BS6 emission norms and the gradual recuperation from an already-slow market of 2019 added more to the headache. To top it all, concerned authorities are not lending enough support to the industry. Automakers have proposed various initiatives to the Indian government, including a limited-time reduction of GST rates, to minimise further losses. However, there has been no update from the govt.

In spite of being the epicentre, the People’s Republic of China is making a fast recovery from the pandemic. Businesses are slowly attaining full efficiency while citizens have accepted the new normals. Still, the fact that the Chinese automotive market grew by 4.4% in April is quite surprising. In other words, it sold 2.04 million vehicles in the period. Experts state that this ‘sales boom’ is an indirect result of COVID-19 safety concerns. A similar trend is expected to happen in India soon. Let us see what the struggling automotive market of India can learn from China:

Rapid production resumption

Employees of the Chinese automotive industry returned to their factories as early as the beginning of March. Wuhan, the epicentre of the virus, contributes around 10% of China’s overall vehicle production. Several facilities in and around the city were also opened in March. To cover back orders, workers were even working for extra hours. It is worth mentioning that India announced its lockdown protocol on March 25.

Self-sufficiency of suppliers

OEMs in China found it relatively easy to obtain manufacturing components as state borders remained open outside the Hubei province (in which lies the city of Wuhan). As suggested by ACMA (Auto Components Makers Association), Indian automakers should develop a ‘China plus one’ supplier network in order to source components from alternative routes (be it a domestic or foreign source) if one path fails. Owing to China’s initial peak of the outbreak, Indian OEMs were facing troubles in the supplier network right from the starting months of 2020.

Creative and effective marketing

As soon as Chinese authorities allowed reopening of dealerships, automotive brands introduced various business strategies (in addition to substantial discounts) to attract buyers. As a prime example, Geely hit headlines by dropping off car keys to customers’ residence using drones to convey the message that test drives or deliveries could be made at the location, contact-free. The assumed risks of using public transport also played an important role in boosting PV sales.

In a similar fashion to maintain social distancing, Indian OEMs have introduced online sales platforms with exclusive benefits. Prospective customers can make a booking, conduct a test drive, make the full payment (online) and get the vehicle delivered at their doorsteps in a safe sanitised environment.

Adequate support from the government

It is quite evident that the Indian government is not paying enough attention to the struggling automotive industry. One cannot ignore the immense contributions made by automakers to assist the medical department in the fight against the outbreak. Hundreds of crore rupees were donated by OEMs to state and central relief funds while also using their facilities to produce essential medical equipment. However, the government seems to have ignored all this as the latest ‘Aatmanirbhar Bharat’ relief package does not mention the auto sector at all.

China, on the other hand, introduced various tax exemptions, subsidies and extended initiatives; mostly applying to NEV (New Energy Vehicles). ‘NEV’ is the term used by the Chinese government to denote electric or electrified vehicles such as plug-in and fuel-cell hybrids. Finance firms have relaxed EMIs of long-term loans for EVs while the deadline for China VI emission norms was pushed forward. The Supreme Court of India had extended the deadline to finish BS4 sales but on an inconsiderate conditional basis.

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SourceCNBC TV18