Coronavirus slated to leave long-standing aftershocks on the industry

We know so far that major automakers like Maruti Suzuki, Hyundai, Honda, Mahindra, Toyota, Tata Motors, Kia Motors and MG Motor, two-wheeler brands like Hero MotoCorp, Honda Motorcycle and Scooter India, TVS Motor Company, Bajaj Auto, Yamaha and Suzuki Motorcycle have suspended production.

Next, major tyre manufacturers have also temporarily halted operations, with shutdowns at Apollo Tyres’ plants at Kalamassery and Perambra (Kerala), Limda (Gujarat) and Chennai (Tamil Nadu), and Ceat Tyres’ plants in Mumbai and Nagpur (Maharashtra) and Halol (Gujarat) also forced to down shutters till advised. Lastly, major auto component makers and OEMs, who are heavily dependent on China itself for key parts and accessories.

Facts and figures

As it turns out, the shutdown is only widening the gap (albeit drastically) between estimations and actual industry figures. While sales are usually high in March, the combination of an overall economic downturn and manufacturers scrambling to meet BS6 emissions norms (which led to manufacturers pulling the plug on many cars equipped with small capacity diesels) had already impacted sales, as a result of which production was an estimated 10-12 per cent lower, or 1.8-1.9 million units as opposed to 2.1 million units (Crisil figures) than the 2019 figures. And now, this sudden shutdown has left manufacturers high and dry.

As a result of all this, auto industry body Society of Indian Automobile Manufacturers (SIAM) has said the closure of manufacturing plants by various automakers and component manufacturers is expected to, at the moment, lead to a shortfall of about 750,000 units in production and $2 billion in revenue in March alone. Additionally, Rs 6,400 crore worth of unsold BS-IV vehicle stock is also languishing with dealers. As these vehicles cannot be sold after 31 March, the Federation of Automobile Dealers Association (FADA) had earlier written to the Supreme Court requesting for an extension on the sale and registration of BS4 vehicles, a request that was already refused on Feb 14. Latest update has been the Supreme Court saying the matter cannot be heard before March 31 (or April 14, after the PM’s public address yesterday), the uncertainty here causing further unrest in the overall feeble market.

The cumulative long-term financial impact of the above (shutdowns, non-availability of essential parts, unsold BS4 stock) cannot be ascertained at this stage, and all we can do is wait and watch while this shutdown, which has been extended to April 14, continues.