Indian Automobile Industry May Be Worst Hit By The Coronavirus

Some are rejoicing the shift of business from China to India and some are jittery about the whole break of the pandemic also. Indian automobile giants like Mahindra & Mahindra Co. (M&M) as well as Tata Motors have cried out loud over the growing unavailability of important Chinese components due to the raging corona virus.

Releasing an official press release, the Chief of Sales and Marketing at M&M’s automotive division, Mr. Veejay Ram Nakra, has declared that “Going into March, we anticipate the challenge on parts-supply to continue for another few weeks, before we get back to normalcy.”

Tata Motors too has expressed concerns over supply disruptions from China. Sales figures are also seeing a steep drop due to unavailability of important components. While M&M reported a steep 42 percent drop in domestic sales, Tata Motors has reported a drop of 34 percent Maruti Suzuki said its total domestic sales were down by 1.6% in February from a year ago.

Industry analysts have confirmed that Chinese imports are important to the whole automobile industry in India and stretch across the value chain. Parts are used in electronics and electrical parts to fuel injection parts and steering components. Finding replacements will not be as easy a task, at such a short duration and is going to severely hit business.

It is confirmed according to rating agency ICRA Ltd. that about 27% of the roughly $17.5 billion worth of component imports into India comes from China. According to Vinnie Mehta, director general of Automotive Component Manufacturers Association of India, says, “Even if vehicle manufacturing is adversely impacted due to imports from China indirectly, it would resonate across the whole value chain." Other companies affected include Bosche, Ashok Leyland, Hero Motocorp to name a few.

According to Shamsher Dewan, vice president and sector head of corporate ratings at ICRA, “High investments and the gestation period involved in developing tooling remains the key prohibitive factor for an immediate shift to new suppliers.” While this is the story on the production side, some sub-sectors in the component universe might have reasons to rejoice too. Tyres could be beneficiaries. It is for a fact that cheap Chinese imports had jeopardized the local industry. This would decline. Some metals and commodity suppliers may also gain as imports from China would fall too.

Economists believe that if the epidemic is not contained in the next couple of weeks, it would adversely hit vehicle production in India. In one sense, the ongoing demand slowdown is a boon. So far in 2020 auto sales have fallen 15% from a year ago.