While not yet a factor, a potential oxygen shortage is on the radar of some of India’s most successful companies.
India’s largest carmaker Maruti Suzuki said on April 27 that so far, local lockdowns and curfews have not had any impact on production and retail demand continues to outpace supply, but the issue of shortage of oxygen will have to be kept under watch.
The Delhi-based company, which makes cars at two locations in Haryana, does not use industrial oxygen for production but its vendors, including steelmakers, do make use of the life-supporting gas for manufacturing purposes.
Maruti Suzuki’s parent company, Suzuki Motor Corporation, controls one plant in Gujarat.
Said R C Bhargava, Chairman, Maruti Suzuki India, “Our production has not been impacted at all so far. We are producing at full capacity and there is no shortage of anything. We are able to sell everything we can produce and send out. Even as some markets are shut down, there are enough open markets for us to sell. There has been and continues to be a shortage of supply in relation to the demand.”
Maruti Suzuki reported a 9.7 percent decline in profit for the quarter ended March 2021, hit by a lower-than-expected operating performance and a sharp fall in other income, though revenue stood strong during the quarter. Maruti Suzuki sold 4, 92,235 vehicles in the March quarter, up 28 percent year-on-year (YoY).
With the government ordering a clampdown on use of industrial oxygen, market watchers are predicting a temporary shortage of supply of steel to the market. The automotive sector is one of the biggest consumers of steel. Industrial grade oxygen acts as one of the raw materials for steel making.
Added Bhargava: “The oxygen situation is something we have to keep a very close watch on because while we ourselves are small users of oxygen, our vendors who make various components are much larger users of oxygen. Production can only happen when all of us are able work to our capacities. So, we have to keep a watch on what happens to this oxygen situation as we go forward and take decisions accordingly.”
As far as the outlook was concerned, the Chairman, Maruti Suzuki India, said that it was difficult to assess demand and production even for the current quarter as business continues to be heavily influenced by the pandemic.
“Demand has been consistently steady so far. If this situation continues it should be a decent quarter for us. There are factors, which we have to keep on watch because how the pandemic progresses, what kind of restrictions come in, what impact it will have, are issues which will determine the remaining part of the quarter. The progress of COVID for the remaining part of this quarter is uncertain. So, we cannot make a forecast on sales,” he added.
Bhargava, however, mentioned that the pandemic is expected to improve demand for cars further. “I see that with the second wave the demand will only strengthen. More and more people will now want to have their personal transport,” he concluded.