The Indian automotive industry may end up facing a disruption that it does not want and is not prepared for too, due to coronavirus
The current coronavirus epidemic that had been declared first on 31st December 2019, may result in the disruption of the manufacturing schedules of the components as well as the vehicle manufacturers in India. This is due to the reason that most of the suppliers to the Indian companies are Chinese companies that have suspended their operations as a precautionary measure.
The level of the parts inventories in the Indian brands will be determining the impact of the timing. As per the industry sources, the inventory levels may be about two months.
Mahindra & Mahindra is one of the companies that is preparing itself for a possible impact. The company has its suppliers in China who supply some of the Tier 2 parts to them.
Dr Pawan Goenka, MD, Mahindra & Mahindra said in a statement that, “Some of the Tier 2 parts that are arriving from China which is a supply constraint for us currently. We are concerned about the production of our vehicles compliant with BS6 if the suppliers do not restart till next week.”
He further added that in case the supply of the parts sd till remains affected ever after a few more weeks, the company may end up having to seek an extension of the 31st March 2020 deadline that has been announced by the government to make a switch to BS6 “for factors that are not in our control”.
The popular MG Motor India has been enjoying a good position in the damp auto market of India. However, ever since it entered the market in the month of July last year, the company may end up facing some challenges this month, because it is still trying to increase the localisation as well as focusing on increasing their production capacity to catch up with the market demand.
Mr Rajeev Chaba, the president and MD at MG Motor India said in a statement that, “In the month of February, we may have shortfall as we only have hand-to-mouth inventory due to our order backlog,”
The Indian suppliers are following the developments to measure the level of impact. “This has been a blow to us. It is clear. The initial estimates will be known when the manufacturers will tell how many fewer vehicles they have manufactured due to the non-fulfilment of the supply”, as per an anonymous statement.
As per a statement by the CEO of a Tier-1 supplier, “Because of the Coronavirus outbreak, some disruptions have definitely occurred. All the manufacturers have been in talks about this issue and if it continues any longer then a part of the supply chain that comes from China will be badly affected. Some of the companies don’t even have enough stock to produce beyond the middle of February for some of the important components. This might turn into a big issue. Currently, we do not really know about the impact of it but it might be felt in the months of February and March too. Although not much is affected right now tough times are expected in the coming months.
It is not just the components but many companies in India are also importing tools from China and if there is an impact, this will affect the SoP of the projects that these tools have been sourced for. A senior officer of a major automaker in India has also said that they might feel the impact in the month of March.
It is favourable that some of the vehicle and component manufacturers will be sourcing their requirements from the alternate regions to cover up any of the losses. But at the same time, the Chinese companies being in deep penetration in the global automotive supply chain, hence it will not be very easy to completely ignore China. Someone has even quoted that “You cannot take China out of the supply chain. It’s impossible.”
The Chinese suppliers have had an amazing exposure in the country. During the year 2018-2019, automotive components costing around $4.5 billion (approximately Rs 32,091 crore) had been imported from China. It has been in the news that the Companies in China may reopen on 9th February 2020.
The Auto industry everywhere else is already been affected by the coronavirus epidemic. Hyundai has reported to becoming the first global automaker to halt their production outside of China because of the shortage of the components.
There is an urgent need to provide an effective treatment to the novel coronavirus so that the lives are protected and also the health of various industries, majorly including the automotive industry.
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