Lockdown guidelines: Resuming operations now not feasible, say automakers

With showrooms shut due to the lockdown and the heightened measures needed to ensure safety of workers, auto manufacturers are not enthused by the guidelines issued by the Ministry of Home Affairs (MHA).

Two-wheeler and car manufacturers would rather wait for the lockdown to be lifted before restarting production, according to some of the company officials Moneycontrol spoke to. Besides the lockdown, vehicle makers are also worried about buyer sentiment, which has taken a hard knock.

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MHA guidelines issued on April 15 allow industries operating in rural areas and manufacturing and other industrial establishment with access control in special economic zones (SEZ) and export oriented units, industrial estates and industrial townships to restart production.

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The final authority of allowing production to take place will still rest with the state authorities, which would agree for production to restart on a case-by-case basis instead of a blanket approval, said a senior executive of a part manufacturer

"Restarting a plant after employing so many restrictions related to health cannot be done in one day. Drafting a thorough module to make sure that workers don't get infected itself will take days. Also, there is no guarantee of flawless supplies from all our vendors without whom production cannot start. And all this is while hoping that demand will hopefully come back," said a senior executive of a Delhi-based carmaker.

TVS Motor Company does not intend to restart production at least before May 3. Hero Motocorp on April 14 said that all its plants will remain shut till the end of the current lockdown. Suzuki Motor Gujarat informed through Maruti Suzuki that its two plants in Gujarat will remain shut till May 3.

Not all automotive plants in India and plants of their auto parts manufacturers are located inside SEZs. Also, some plants though may be outside the big metros but still fall under municipal corporation limits of satellite cities.

"Any manufacturing business cannot afford to run partially open operations. A factory working at 20-50 percent capacity will burn a lot more cash compared to when it is completely shut. Many (automakers) will wait for normalcy to return," Ravi Bhatia, president India and director Jato Dynamics tweeted.

Automotive dealers, meanwhile, are busy trying to get an extension from the Supreme Court for selling Bharat Stage IV (BS-IV) stock. There is BS IV stock of 700,000 two-wheelers, 15,000 passenger vehicles and 12,000 commercial vehicles which remained unsold before April 1.

The Supreme Court granted ten days for selling only 10 percent of the unsold stock after the lockdown was to be lifted. Some manufacturers like Honda Cars India and Hero MotoCorp agreed to buy back the unsold stock.

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“Unless there is a direct government intervention in the form of a ‘cash for clunkers’ scheme or a reduction in GST, demand for automobiles will remains subdued for several months after lifting of the lockdown”, said an executive from a company that makes steering systems.

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