In a major setback, auto manufacturing has not been included in the list of activities that will be allowed after April 20
This has been revealed in the new list of activities published by the Ministry of Home Affairs. Many players in the auto industry were hopeful that auto manufacturing will be allowed to commence once the 1st lockdown ends on April 14. But the lockdown has now been extended to 3rd May 2020. From 20th April, Govt will allow certain industries to function. Auto industry is not one of them.
The decision of Ministry of Home Affairs appears to have overridden the recommendations provided by the Ministry of Commerce. The latter had suggested that big industries such as auto manufacturing should be allowed to commence operations on a limited scale.
It was proposed that auto companies operate in single shifts with 20-25 percent capacity, which would make it easier to keep a check on the spread of coronavirus. The Ministry of Commerce had indicated that allowing big industries to function will help revive the economy and improve liquidity for people.
Not allowing auto manufacturing during the extended lockdown period is a serious concern for automakers. As per estimates provided by the Society of Indian Automobile Manufacturers (SIAM), the auto industry in India is losing around Rs 2,300 crore every day due to lockdown. It may be recalled that most auto companies had shut down operations a day before the lockdown came into force from March 23. With the lockdown extended, cumulative losses of auto companies will be twice as that of earlier estimates.
Even with the lockdown, automakers have come up with innovative strategies to boost sales. Many companies have launched online sales platforms that allow customers to buy their vehicle online. Customers have the option to take delivery at the dealership or get the vehicle home delivered. Customers can also opt for finance options, offers, and exchange services, all of which are processed online. However, as auto manufacturing has not been allowed, deliveries of some models may be delayed.
Extension of lockdown has also created other problems for auto sector. For example, the deadline for registration of BS4 models that were purchased before March 31 will need to be extended. This will require a new order from the Supreme Court that had earlier provided time till April 30 for such registrations. The 10-day window provided by Supreme Court to sell BS4 models will also have to be deferred.
With the extended lockdown, the entire auto industry ecosystem is suffering and not just the OEMs. It includes various entities such as dealerships, component manufacturers, finance and insurance companies, and suppliers such as paint, glass, rubber, oil and plastic manufacturers. The auto sector employs lakhs of people and extension of lockdown will create challenges for everyone.
We hope that the government will revisit its decision and allow auto companies to commence operations with limited capacity. Plants located in areas not affected by coronavirus can be allowed to function with strict adherence to social distancing and sanitization norms.