Corona restrictions and lockdown puncture auto industry prospects

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NEW DELHI: Coronavirus stung the auto industry in March as the beginning of restrictions and a complete national lockdown towards the latter half of the month completely squeezed production, as well as wholesale deliveries to the dealerships, across the categories of two-wheelers, cars and SUVs, and commercial vehicles.

The numbers fell by record levels, with experts and nervous industry officials predicting that the “worst is yet to come” with the entire month of April expected to be caught in the lockdown.

While there are certain indications that production may begin in limited numbers and with very few staff, there is no certainty around this probability till now. Also, there is no clarity as yet on when the retail sales would begin, and how enthusiastic would the customers be towards purchases.

“The unfortunate outbreak of COVID-19 has hit us all, which has impacted businesses across the world … We hope we are able to tide through this unprecedented crisis,” Rajesh Goel, Director (Sales & Marketing) at Honda Cars India, said.

Sales of cars declined by 52% in March, while for UV/SUVs, the squeeze was 45%. This despite the launch of the Creta by Hyundai. The sale in volume-heavy motorcycles segment was also down by 42%.

But the biggest declines came in the commercial vehicles category, considered the barometer of the economy. While production fell by 83%, the dispatches to dealerships were down by 88%.

RC Bhargava, chairman of Maruti Suzuki India, said that it is too early to make any confirmed indications about the direction that the auto industry will take. The company is at the moment finalising plans for worker safety and plant sanitisation in case production gets allowed.

“It is not possible to make any immediate estimate about where the industry will go from here. It will take some time before we can give any studied response. Just like the worldwide industry, we are also hoping that a vaccine to tackle coronavirus is developed at the earliest, or some cure comes out,” Bhargava said.

Companies have been nervous as they stare at a washout in fiscal 2020-21, even while they take efforts to protect their dealerships that are in an even worse situation.

“… the company’s priority is to ensure the safety and well-being of all its stakeholders and most importantly our dealers and their staff who are in the frontline … we have studied the fixed cost expenses of dealerships and have come up with a relief package called the COVID package to assist in maintaining liquidity to improve cash flow,” Naveen Soni, Senior VP at Toyota Kirloskar Motors said.

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