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The Auto Industry Now Has Its Ignition On, But Not Revved Up
Saddled with inventory in the pipeline and token footfalls at showrooms, the auto industry is taking baby steps toward renewing production By Avishek Banerjee
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The easing of restrictions in the third phase of the lockdown to battle the Covid-19 pandemic should have been that welcome drop of rain in a desert, but so far it is merely a drizzle of hope in a moribund marketplace. The automotive industry had already been stressed when the lockdown was announced, having witnessed one of its steepest declines in domestic sales.
March and April, the months that followed the announcement of the countrywide lockdown were the darkest phase in the industry’s history, as production and sales of vehicles came to a standstill. Now that restrictions on movement have been eased in the third phase, production of automotives have resumed, but at a minimal level. Industry experts justify the baby steps to normalcy, pointing out that there’s enough inventory in the pipeline and that showrooms are yet to witness significant footfall.
Rajesh Menon, Director General, SIAM says, “The Indian automotive industry across the entire value chain of suppliers, OEMs and dealerships, is just opening up post the lockdown related restrictions. Most of the OEMs have started very limited production”. Vinnie Mehta from ACMA corroborates the statement, saying that only around 10 per cent of the capacity is being utilised in the auto component sector.
The lockdown was announced when there already was a de-growth in the automotive industry and the disruption of the supply chain following the social distancing restrictions mandated to fight Covid-19, served as a double whammy. Most auto companies shut down their manufacturing units in the last week of March 2020, to ensure safety at the workforce and to safeguard employees from a health hazard. Estimates drawn up by SIAM show that the auto industry losses were to the tune of Rs 2,300 crore a day in terms of turnover during the closure.
Maruti Suzuki India resumed operations at its Manesar plant in Haryana after about 50 days of closure on 12 May. The country’s largest passenger car maker, which has initiated work on a single shift basis from this facility for now, also kicked off production at its Gurgaon facility on 18 May. Despite the Covid-19 induced slowdown, the company is on course to invest Rs 2,700 crore during this financial year vis-à-vis Rs 3,250 crore invested during FY 2019-20. The company has received over 5,000 bookings in the last few days.
Maruti Suzuki Chairman R.C. Bhargava has announced that the company would restart operations in one shift in the initial phase and focus on a limited number of its best-selling models. He has said that the sooner the virus is controlled, the better it is for production. Announcing the latest financial results, he said, “There is no point in speculating, given the various uncertainties existing in the market. Production, supply, demand, affordability, economic growth – all of it is under stress – car sales cannot happen in abundance.”
“There is no point in speculating ...Production, supply, demand, affordability, economic growth – all of it is under stress,”
R. C. bhargava, Chairman, Maruti Suzuki
“One-third of our dealers have opened out of which 60 per cent are from the hinterland,” Bhargava said, “Around 2,000 more dealers will be opened but it will take some time.” Meanwhile, the Suzuki Motors Group (SMG), which manufactures cars on a contract basis for MSIL, revealed that it would re-start production of vehicles from 25 May, 2020.
Pick Up in Sales
Hyundai Motor India Ltd., the second largest passenger vehicle maker, also restarted production on 8 May. The Indian arm of the South Korean major has close to 9,000 new car bookings and has delivered over 5,600 Hyundai cars to customers across India in a span of 22 days. An official spokesperson of Hyundai India, says, “We are rolling out 200 cars per day in a single shift since 8 May. However, production ramp up depends on market dynamics. The output is for both domestic and export markets.”
Hero MotoCorp, the world’s largest manufacturer of motorcycles and scooters, became the first two-wheeler manufacturer in the country to resume operations after it reopened three of its manufacturing plants at Dharuhera and Gurgaon in Haryana and Haridwar in Uttarakhand and subsequently at Neemrana in Rajasthan. On 7 May, it commenced vehicle dispatches from its manufacturing facilities for the 2020-21 fiscal year (FY’21).
A Hero MotoCorp spokesperson says, “Currently we have opened four plants and none of them are functioning to (full) capacity because of the manpower crunch at the plants.” The company has also commenced retail operations with the re-opening of more than 1,500 customer touch-points, including authorised dealerships and service centres. Since then, as many as 10,000 motorcycles and scooters have been sold till 10 May.
Honda Motorcycle & Scooter India Pvt. Ltd. (HMSI) has also announced that its production operations will resume at all its four plants in two phases.