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Auto industry in India pushed back by up to 6 years – Due to corona virus

The coronavirus pandemic and the subsequent lockdown have had a deep impact across the Indian automobile sector

The slowdown in the auto industry goes way back to several quarters. Lower sales have been reported by almost every automaker in the country and the future does not seem very promising as well. The upgrade to new BS6 emission standards, a weak economy, higher capex to bring in newer machinery and technology and the higher pricing of BS6 cars created a negative impact on auto sales.

While most of the industry was BS6 ready and set to embark on a more promising future, the COVID-19 pandemic hit and once again the industry is going through what can be termed as its worst setback. Auto components manufacturer, Bosch has estimated that the auto industry has been pushed back around 4-6 years due to the effect of COVID-19.

The auto sector could fall by as much as 30 percent this fiscal while it would take at least 4 years to revive. In 2018-19 sales of heavy commercial vehicles stood at 5 lakh units which dipped to 2 lakh units this fiscal. Passenger cars which had seen sales of 20 lakh units went down to 10 lakh units this fiscal while two wheeler sales, which peaked at 25 million fell to 12 million in the current fiscal which is the level at which it was in 2010.

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This shows that while the industry has been pushed back 4 years due to economic slowdown, the COVID-19 pandemic has set the auto sector back another 2 years as was reiterated by Soumitra Bhattacharya, Managing Director of Bosch Limited.

Bosch Limited has felt the impact of the slowdown and subsequent lockdown in a big way. The company, which also predicts that the auto industry could fall by 30 percent this fiscal, could not operate its plants to full capacity. The parts supplier will be assessing demand and will resort to block closure if they feel that demand is not substantial enough to sustain shifts. All non essential expenditures will be stalled and more investment will be diverted to electrification projects.

The impact of the slowdown and the pandemic could be seen in the falling revenues of the company. For the quarter ended March 31, 2020, revenue from operations dipped 18 percent to Rs.2,236 crores while profits fell 80 percent to Rs.81 crores. Taking the whole year into account, revenues dipped to Rs.9,841 crores and profits stood at Rs.684 crores down from Rs.1,692 crores in the previous year.

The company noted a decline of 24 percent in its business sector, its Powertrain Solutions business declined 30 percent, while domestic sales dipped 26 percent and exports fell 6 percent. Bosch has also invested Rs.366 crores into the expansion of the Bidadi and Adugodi facilities and now awaits some government stimulus and a revival in demand.

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