More than 100 factories producing a variety of automobiles spread all over India were ordered shut more than a month ago to arrest the spread of novel coronavirus.
Therefore, for the first time in the history of automotive companies in India, the industry will possibly report zero sales in a month as they await further directives on reopening of plants in the first week of May.
Auto companies are expected to share April sales numbers, on May 1.
From producing an average of 2.19 million units a month in FY20 these factories making two-wheelers, cars, SUVs, trucks and buses were brought to a complete halt in April.
Vehicle dispatches to dealerships from factories (wholesales) came to a naught which are to be powered only by a Bharat Stage VI engine, the cleanest emission norm there is.
By FY20-end, India stood as the fourth biggest automotive market in the world that contributed as much as 7.1 percent to the country’s GDP and providing employment to over 35 million people (including the auto components industry), as per data provided by the Ministry of Commerce and Industry.
The lockdown ordered by the Centre on March 25 whose second phase is due to end on May 3 saw more than 25,000 dealerships draw down their shutters overnight. The dealer community employ around 4 million people at dealerships and service centers, as per data shared by the Federation of Automobile Dealers Association.
“There has never been a crisis like this, none of us has been through this before anywhere else and no one will have a magic wand to make it all go away. It will be a long time before demand gets back on its feet,” said a senior executive from a Delhi-based car making company.
Despite securing clearances from state authorities for restarting production from April 20 after relaxation orders that came from the Centre, very few companies and their component suppliers have shown interest. Factories closer to ‘hotspots’ or ‘containment zones’ have been ordered to remain shut.
“A vehicle manufacturing plant has multiple divisions employing hundreds of workers. They come from different parts of that city and mingle with each other. How will it be business as usual if the rules mandate six feet of distancing when reality has to be quite different? How would we know that the plant head or the general manager will not be thrown behind bars if even one positive case is found inside the plant?” asked another industry veteran based in Delhi.
With one-third of the days in March wiped out due to the lockdown the month reported a 51 percent decline in passenger vehicle and 88 percent decline in commercial vehicle segment volumes. Two-wheeler sales slumped 40 percent while three-wheeler volumes more than halved in the same month.
While April was an unprecedented washout month, May would not be much different than March despite expectations of lifting of the lockdown.
Ajay Srinivasan, Director, CRISIL Research, “An analysis of district-wise sales pattern reveals that the passenger vehicle segment has higher inherent risk compared with two-wheelers, because of a relatively higher concentration of sales in the top 100 districts. These districts account for 62 percent of passenger vehicle sales and 45 percent of two-wheeler sales, in terms of volume.”
Change in customer behaviour, the impact of COVID-19 on consumer incomes and finance penetration and greater emphasis on selling vehicles online by manufacturers will hit sales.
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