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Indian auto industry losing Rs 1,500 crores a day – Due to shut down

The Indian auto industry is in the throes of an extended slowdown with the new COVID-19 virus spreading its tentacles across automakers and ancillary units

On a global level, auto shows have been cancelled, major motorsport events have been postponed (or cancelled altogether) and production operations have been brought to a standstill. The COVID-19 virus has spread its tentacles across the world, across every industry and every household, leaving a trail of devastation and destruction in its wake.

The Indian auto industry had been facing severe slowdown over the past 18 months due to a skewed economy and weak demand, and the coming year does not hold much promise as well. Many automakers in the country have announced production operations with minimum workforce or a complete suspension of production due to the corona virus outbreak.

Hyundai India car plant
Image for reference.

This is estimated to result in a revenue loss of Rs 13,000-15,000 crore in case of a complete shutdown by all automakers over the next 10 days. In other words, the data works out to revenue losses of Rs 1,300-1,500 crore per day. The automobile sector in India which earns gross revenue of approximately Rs 2,000 crore per day contributes 7.5 per cent to the country’s GDP.

It started off with automakers such as Fiat, Mahindra, Mercedes and JCB announcing plant closures and was followed by Maruti Suzuki, Tata Motors, Hero MotoCorp, Bajaj Auto, Honda Car India, Kia Motors, Yamaha, Ashok Leyland, Renault, JCB, and Eicher Motors. Automakers such as Nissan, MG Motor and TVS Motor have not announced any shutdown plans yet.

Not only has the corona virus affected automakers but also dealerships and ancillary units. Till date, only some automakers have stopped production in select locations. With positive cases in India climbing to crossing 400, the industry could be facing a 100 per cent shut down in the days to come.

India Ratings and Research (Ind-Ra) has stated that the spread of Covid-19 would not only impact supply but also demand and exports. The automotive supply chain in the country is impacted due to the non-availability of components. A large part of these components are imported from China. This will not only impact the aftermarket segment but also the repairs and maintenance markets.

The Federation of Automobile Dealers Association (FADA) has approached the Supreme Court to extend the deadline for sale of BS4 vehicle from 1st April 2020 to 31st May 2020. Dealerships have been unable to sell off these stocks in view of the current situation in the country as counter sales had dipped by as much as 60-70 per cent. Even if Indian automakers manage to start operations from 1st April 2020 (which seems highly unlikely under the present conditions), it could take a long time to get back on track.

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