Ever imagined a virus wreaking havoc around the world and to the extent where everybody has, directly or indirectly, fallen a victim to it. The pandemic is as much a new phenomenon as the word ‘quarantine’. So was the impact of COVID on Indian automobile industry which proved to be new and detrimental. With the advent of the COVID-19 virus, the world has encountered unfortunate problems ranging from economic downfall to rising death tolls.
The impact of COVID-19 in India has elevated over the past few months and does not look quite promising to lessen any soon. The undercurrents of the pandemic began to be experienced by the mass as ‘lockdown’ mandates were established around the world. The lockdown norms were meant for safety and could not be rebelled against.
With its epicenter in China, it has been troublesome for India to revive from the ghastly impact of COVID on Indian automobile industry. China has not only been condemned to have slowed down its own economy but also India’s since both have been trading partners since 1994. India and China had been functioning on trade agreements where huge imports of India are dependent on China.
The supply of automotive and automotive parts to India is heavily dependent on Chinese imports. Research shows, from 2018 to 2019, automotive components worth $4.5 billion was imported from China to different of its trade partners, including India. 27% of automotive components manufactured in China are imported to India and the numbers don’t lie! Thus, a minimal blow to their relationship would cause the automobile industry to slow down in India.
Why Has The Automobile Industry Slowed Down In India?
The reason why the automobile industry slowed down in India can be rested upon the fatal outbreak. Never before the pandemic had India encountered such times of crisis where its automobile industries are in jeopardy. Worldwide lockdown protocols had rendered most Chinese manufacturing industries ineffectual which have caused the Indian automobile industry to come to a halt.
As stated by the Chinese Association of Automobile Manufacturers ( CAAM), the impact of the outbreak is too severe to avoid a major financial crisis. The financial disintegration faced by automakers has caused Chinese markets to ripple whose effects have been enormously felt in India. The automotive manufacturing cells have faced a complete lockdown under the direction of the Chinese government and the Indian factories that are solely dependent on the components are at loss.
EGR modules, fuel injection pump, turbochargers, electronic components, airbag components etc are a few of the automotive components that India imports from China apart from a wide array of vehicles. When production of these primary non-domestic components are at a standstill they tend to limit the productions of automobiles, passenger vehicles, commercial vehicles, and other two-wheelers.
The impact of COVID-19 in India has majorly affected the automotive sector which was already suffering a slowdown in the last year due to structural alteration in Goods & Service Tax (GST), axle-load reforms, liquidity crunch, change to shared mobility, etc. The outbreak has now added to its tribulations.
Tribulations In Indian Automobile Industry
The problems faced by the automobile industry in India amidst the COVID-19 outbreak largely revolved around lack of funding. For automobile industries to sustain their fundamental operations, it requires funding which is seemingly absent, more so during this time of crisis. The impact of COVID-19 in India has already set back the development which the country had made in mobility technologies and alternate fuel. As a solution, several companies have taken the desperate call to exit vehicular segments and markets that do not generate profits.
Another problem that hovers above the automobile industry is generally encountered by Indian car manufacturers. Amidst the pandemic and lockdown, automobile dealers have been unsuccessful in vehicle deliveries. This is mostly because of the halt in imports from China which is essential in the completion of vehicles for sales.
Vehicle sales have also reached a new low since the economy is shut down and the roads too! Indian car manufacturers have now considered selling off finished goods at a heavily discounted price post-lockdown. Not only are the manufacturers facing an imbalance in sales but also experiencing stress regarding labor.
Impact Of COVID On Indian Automobile Industry
The impact of COVID-19 in India has seeped in every nook and corner of society and has caused millions to get displaced from employment. As the labor force is becoming scarce, production and sales are suffering subsequently. The deteriorating market conditions have not only caused the automobile industry slowdown in India but also caused the value chain to succumb to the domino effect. The entire system of manufacturing is bound to disintegrate as market conditions have led suppliers into the nightmare of liquidity issues.
The subsidiary companies of a retailer or an automaker also known as captive finance companies have already been affected due to increased loan defaults while new loans are presumed to lower even further. Automobile industries in India are facing difficulties in determining the creditworthiness of their customers leading to a decrease in vehicle sales since the beginning of the lockdown.
The impact of COVID-19 in India is also likely to disrupt mobility solutions, the market for after-purchase service providers used cars, all of whose funds are dependent on consistent projects. Mobility services, such as shared and rented car services are suffering the backlashes of the disruptive virus only to add up to the problems faced by automobile industries in India.
What Now With The Second Wave At The Door?
If the initial impact of COVID-19 in India seemed to be detrimental enough then you are in for a surprise. The automobile industry slowdown in India is expected to hit a new low as the second wave of the COVID virus is surfacing already. India has reached a new peak of COVID cases indicating several additional issues that would face Indian car manufacturers.
The surge in daily cases in the country has raised severe concern about how the economy would sustain and how the automobile industry slowdown in India be curbed to a considerable extent. Although mobility situations are not promising, Indian car manufacturers might consider few solutions to overcome the predicament.
- Indian car manufactures and suppliers can consider an alternate option for importing automotive components although the possibility of it happening seems bleak.
- The Indian automotive industry must consider formulating an action plan in order to gain global vendors instead of limiting its import only from one region.
- For vehicle sales to remain somewhat balanced, manufacturers must consider domesticating production systems.
The impact of COVID-19 on Indian automobile industries have been resilient during the pandemic and the country requires strong financial and local support to go back to its original strength. The problems faced by automobile industries in India need to be tackled, keeping in mind the profundity of the pandemic situation. It only requires unity and local cooperation for the country to stand up and regain its lost strength.
