Posted On : 25 Feb, 2020
In the third month of Coronavirus, the Indian Auto Industry is now feeling the warmth with rampant disruptions to its supply chain as China the most important supply for components and spares is certainly stalled, and now the effect is transferring to South Korea another major country dominating the passenger automobile marketplace. With no clear remedy in sight, Indian automakers are planning production cuts to address the situation as many feel the smoother transition to BS-VI will now be a frightening task.
CORONAVIRUS- a nightmare for Auto Industry
The 10 percent cut in the production of automobile has been announced by the automaker like Hero MotoCorp and TVS Motors for February and the struggle of Mahindra to finish the final batch of its BS-IV vehicles are the clear indications that the Indian Original Equipment Manufacturers (OEMs) are not able to keep its plant in operation without the help of Chinese parts. Auto Industry Experts says that the situation will further intensify as the manufacturers have exhausted their extra parts inventory which was a build-up for the Lunar New Year holidays at the beginning of early February.
Mr. Ashim Sharma, Partner & Group Head of Nomura Research Institute said that the next two months (March and April) will witness the stability in the production of vehicles if the closure of the Chinese factories continues till the end of February and it is practically impossible to find the replacement of all the parts manufactured by Chinese companies. Mr. Sharma added that Wuhan is the largest manufacturing hub of some of the critical components of the auto industry and sourcing or importing such parts from other regions will cost us an extra burden.
The Automotive Components Manufacturers Association (ACMA), the apex body of the Indian Auto Component Industry said that they are closely monitoring the situation however it will be too early to predict that what will be the impact on OEMs supply chain.
As per data shown by the UN, China is a key supplier of components to vehicle plants around the world with shipping nearly $35 billion of components in 2018. In the financial year 2018-2019, India has imported auto components worth $4.6 billion from China which accounted for 27 percent of the overall imports into the country. In the first half of the current fiscal, India's imports from China stood at $2 billion.