| May 10
India's car industry faces unprecedented slump amid Covid-19 restrictions
India`s automotive industry is facing an unprecedented slump as the country continues to enforce a nationwide lockdown to stem the spread of the deadly coronavirus. Major car manufacturers in Asia`s third-largest economy reported zero car sales in April.
Some industry analysts say car makers could end up benefiting from the pandemic once India emerges from its lockdown, with more consumers expected to move around the country in their own vehicles rather than public transport, to avoid the risk of infection.
In the short term, however, there is no respite for car manufacturers in sight.We believe the next two months will also witness a subdued performance due to the ongoing Covid-19 issue and lockdown,” says Sneha Prashant, a car sector analyst at Centrum Broking, a financial services company in Mumbai.
“But we believe that social distancing will become the new normal post Covid-19 too, and there will be a shift from shared mobility to personal mobility.”
On March 25, the Indian government imposed one of the world’s strictest lockdowns in a bid to contain the spread of the virus. All non-essential businesses were closed and factories such as car manufacturing plants were shut as most of the country’s 1.3 billion people were confined to their homes.
India’s automotive industry has subsequently lost $300 million (Dh1.1 billion) a day, according to the Society of Indian Automobile Manufacturers.
The country’s largest car maker, Maruti Suzuki, reported an unprecedented “zero sales in the domestic market” in April. The company exported 632 vehicles, however, once port operations resumed.
Car companies such as Hyundai Motor India and Mahindra & Mahindra reported a similar scenario of zero sales in the domestic market and only limited exports in April.
Such a slump for India’s automotive sector, which is considered a bellwether for the wider economy, is concerning. The sector accounts for more than 7 per cent of India’s gross domestic product and employs about 29 million people, directly and indirectly, according to Siam data.
Car makers in India manufactured more than 26 million units, including passenger and commercial vehicles and motorcycles, during the financial year that ended on March 31, data shows.The car industry, however, was struggling even before the coronavirus pandemic amid a broader slowdown in the Indian economy and a credit crisis in the non-banking financial sector of the country.
Last year, hundreds of thousands of jobs were lost in the sector, while some dealerships shut down amid temporary closures of plants as a result of subdued demand for cars.
“The [automotive] sector has endured tough times over the past six quarters,” says Raghunandhan Nl, an automotive and ancillaries analyst at Emkay Global Financial Services.
The impact of the lockdown is, however, is far worse than the challenges the industry faced last year.
The industry received some much-needed relief last Monday despite India`s lockdown being extended for another two weeks. The government eased restrictions and car companies can now resume production, albeit with limited operations and smaller teams.
Dealerships in some parts of the country less affected by the spread of the coronavirus were also permitted to resume operations.
BMW Group India on Thursday restarted operations at its car assembly plant in Chennai with less than 50 per cent of its usual workforce. It said it has redesigned the plant’s layout to ensure social distancing and its employees have been provided with protective gear as a precaution.
But getting up and running again from a literal standstill is not easy.
Honda said it is finding it difficult to restart work due to travel restrictions that are still in place. It has, however, managed to re-open some of its dealerships.
“Barring a few states, dealerships have to take approval from local authorities to commence operations,” says Vivek Kumar, an automotive analyst at JM Financial in Mumbai. “Local authorities are still cautious in most of the regions.”