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Last Updated : May 23, 2020 05:47 PM IST | Source: Moneycontrol.com

This week in Auto: Auto industry is limping back to normalcy

Here is a complete look at all the major developments in the auto space this week

Abhiram Eleswarapu

Production lines are rolling out spanking new cars and bikes again with the easing of lockdown restrictions. But business resumption is turning out to be tougher than anticipated.

Demand uncertainty, supply chain support and reverse migration are the biggest worries for the auto industry presently. More on this later in the article, here is a complete look at all the major developments in the auto space this week.

BMW Motorrad launches F 900 twins

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BMW Motorrad India has launched the F 900 twins, one a street naked and the other a sport tourer. The F 900 R is available in only the standard variant while the F 900 XR get two variants – Standard and Pro.

Both bikes get an 895cc parallel twin engine based on the 850 GS’s motor. This powerplant, however, churns out 105 PS of power and that is 10 PS more.

Apollo and Bajaj announce Q4

Two-and-three-wheeler manufacturer Bajaj Auto on May 20 reported a 0.4 percent growth in standalone profit at Rs 1,310.3 crore for the quarter-ended March 2020, supported by a lower tax rate and higher other income.

Apollo Tyres on Tuesday reported a 7.36 percent decline in its consolidated net profit to Rs 77.8 crore for the fourth quarter ended March 31, 2020.

Bajaj Chetak to go slow

The nation-wide lockdown has pushed back scheduled market expansion of Bajaj Auto’s first all-electric, celebrated two-wheeler Chetak by a few months, a top company official told Moneycontrol.

Commercially launched in January this year, the electric Chetak went on sale only in Pune and Bengaluru. The company later had shut down bookings of the two-wheeler.

High prices dent demand for diesel cars

The popularity of diesel vehicles in the Indian auto industry may take a further hit, with few models getting the BS-VI upgrade.

And the ones that get it have seen the price gap further widening from petrol versions, putting a question on their demand in a market hammered by the COVID-19 crisis.

Apollo, Bosch cut capex

Apollo Tyres, India’s second-largest tyre maker has cut its capital expenditure (capex) plan for FY21 by another Rs 400 crore, as the COVID-19-led slowdown continues to impact business operations.

Bosch has slashed its capital expenditure (capex) by half for FY21, hit by the ensuing slowdown because of the coronavirus pandemic. The company invested Rs 399 crore last year.

Auto body says govt’s economic package wont create demand

Industry body Society of Indian Automobile Manufacturers (SIAM) has said that the government's economic stimulus package will not create demand.

Finance Minister Nirmala Sitharaman over May 13-17 announced in five tranches details of the Rs 20 lakh crore package.

Auto industry is literally limping back to normalcy

At the time of writing this article all of India’s car and two-wheeler manufacturing companies have restarted their factories after having been in the state of complete shutdown since March 25.

But popular estimates state that it won’t be before mid-June that there will be any substantial production from them.

If retail demand uncertainty wasn't enough, the double whammy of reverse migration of labour has posed a bigger question over smooth resumption of operations.

Many Tier 2 and Tier 3 component suppliers who now have some backing from the government under the revised MSME care program are struggling source manpower.

Typically an automaker sources parts from 100-400 suppliers depending on the level of localisation the company has managed to achieve and the size of the vehicle itself. While Tier 1 component-making companies supply finished products to automakers to be directly installed into the vehicle, Tier 2 and Tier 3 companies supply unfinished components or materials.

The lower rung companies make use of hard labour which is where unskilled manpower is put to use. The massive reverse migration of labour has put such companies in a tight spot.

“We have about 400 tier 1, 3000 tier 2 and unknown tier 3 suppliers spread across nine states. 20-30 among these fall in some kind of restriction or other,” said a senior executive from Maruti Suzuki.

Bajaj Auto, India’s third largest two-wheeler maker and the largest exporter of two and three-wheelers has restarted each of its three plants. Though it has export orders of Rs 1,000 crore, the Pune-based maker of Pulsar bikes, is worried about its supply chain.

Soumen Ray, chief financial officer, Bajaj Auto said, “We are concerned about getting our supply chain running.”

“If even one product is unavailable from any of the three tiers then the whole system comes to a grinding halt. Then due to short availability of manpower cost of labour itself is bound to go up,” said a top executive of a Delhi-based automaker.

Companies are operating the plants not just with limited supplies but with very limited manpower as well. Local administrations are not allowing use of 100 percent manpower to run the factories but only a certain percentage. This is one of the other reasons why production will remain constrained for a few more weeks.

Soumitra Bhattacharya, Managing Director, Bosch, said “April has been a wipeout for the whole industry and Bosch is not an exception. May will be a slow starter and June, I estimate, that the whole industry will not be doing more than 25 percent (in peak capacity) at best.”.

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First Published on May 23, 2020 05:47 pm
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