Auto Industry: Rs. 50,000 crore production loss is expected in 21 days lockdown

Published On : 26 March 2020
By Ganesh Yaramati

Initially, the words of Maruti chairman were “As of now, there is no panic. Our production is not getting affected now because of China and Coronavirus Outbreak". But later on, slowly the big game of COVID-19 started giving very clear signs of shutting down everything and everywhere. Initially started at Wuhan that slowly leads to a lockdown of the whole India. Although a lot of automakers are running their plants at low capacity utilization, later slowly the sources of auto components also changed due to shut down in China, the Indian source is preferred for tire 2 auto components such as brakes which are largely imported from China. The net worth of Chinese imports on auto components is 10 to 30% that is 4.5 billion dollars in the fiscal year 2019-2020. As of now there, we have seen a temporary halt in all operational plants of automakers and some of them still running in low capacity, Auto Makers were shutting down the plants for a week that was till 31st March but as there was an announcement from Prime Minister Modi Ji on 24th March, regarding the situations and 21 Days Lockdown. The shutdown expected to generate losses of almost Rs. 50,000 crores in the auto sector in India.

The SIAM (Society of India Automobile Manufacturing) and ACMA (Automotive Components Manufacturing Association of India) issued the advisory note to all automakers in India regarding the situation and asking them to limit the production accordingly to keep the situation in control and in support of lockdown as well. In the last 10 days, there were expected revenue losses of 10,000 crores in the automobile sector in India. Major players like Maruti, Hyundai, Honda, and Tata Motors have opted towards a temporary shutdown of operational plants that are human-centric.

  • Maruti Suzuki is almost shutting down the operational plants around the country and R&D labs remain closed till April 14, 2020.

  • Hyundai has closed manufacturing plant at Chennai initially and now ordered to limit the production and if required shutting down will be ordered as well.

  • Toyota Kirloskar motors have already stopped the production at Bidadi Karnataka which is the largest plant in India as well.

  • Tata Motors has ordered the closure of operational plants in Pune as they see the threat from the ongoing pandemic.

  • Largely all the automotive employees are now given Work from Home to ensure the situation under control and continue the work that is in need and required as well.

  • There is also seen the advance payments by certain automakers to make sure all employees' safety and making sure they will be back soon.

We can expect it takes a lot more time to regain its potential and start doing well. Initially, all the plants can start full-scale production by April 14, 2020. if the pandemic gets under control. The auto sector is already going through a recession and the BS6 norms hit and change in the vehicle production was already started with an available inventory, now the COVID-19 has hit the auto sector very hard that as it's the first time in the auto sector industries in recent time. The current position of certain automaker remains as follows Maruti shares are down by 12% and the inventory levels are at 43%, the Tata Motors is also badly hit by this pandemic disease and inventory levels remains at 71% and Mahindra and Mahindra inventory level are at 59%. A lot of automobile experts are expecting there will be a rise in the prices of automobiles as the automaker as to bear the losses heavily.