INDIAN AUTO INDUSTRY: READY FOR COMEBACK AFTER CORONA

INDIAN AUTO INDUSTRY: READY FOR COMEBACK AFTER CORONA

WHY AUTOMOBILE INDUSTRY SLOWDOWN IN INDIA

While 2020 has pushed the economy into a slowdown due to the coronavirus situation, for Indian automobile industry has witnessed one of the worst years for the automobile industry with falling sales and piling inventory. In 2019, various factors were contributing to the automobile industry slowdown.

Some of the were the primary reasons for the prolonged slowdown were:

• The overall slowdown in the economy
• The liquidity crunch
• The crisis in the non-banking finance companies (NBFC) sector
• The increase in third party insurance and road tax
• The consequent hike in the cost of acquisition
• The uncertainty arising out of inventory liquidation before the BS-VI transition and expectations of a possible GST reduction

Even before COVID-19, the automotive industry had its share of challenges and the pandemic has turned those challenges into a crisis with the production facilities being shuttered and many supply chains being ground to a halt.

When it comes to the global situation, China saw total vehicle sales decline by 84 per cent from January to February followed by factory shutdowns in Europe which created production losses of more than 1.2 million vehicles through March, affecting 1.1 million jobs. With this, the global supply chains are being hampered by supplier shutdowns, border closings and curtailed operations by logistics service providers.

But we are already seeing signs of recovery with the COVID-19 risk is declining in China and vehicle sales for March in China increased by 22 per cent over February. The Chinese original equipment manufacturers (OEMs) and suppliers are ramping up production and there are increased investments in digital footprints in manufacturing.

It is very evident with the history that the automotive industry will very likely recover and the winners will probably become stronger and more focused. According to a recent report, half of the surveyed automotive executives say that to succeed or even survive in the next ten years in the auto industry, they need to reinvent their organizations with digital technologies, supported by data.

Having said that, it is also essential to understand that this crisis will force automotive companies to accelerate their existing transition to digital sales, connected vehicles and autonomous driving. Being a starting point for those companies that have been slow to start the digital journey, this crisis will put them at risk for survival.

Globally OEMs and suppliers are retooling their plants to produce medical equipment and personal protective equipment (PPE). This change is to help distribute supplies necessary to avert deaths. For example in the U.S., automotive companies like Ford and GM are making ventilators and PPE surgical gear, while Ford plans to the production of 50,000 ventilators in 100 days. When it comes to automotive companies in India like Mahindra, they have embarked on a similar effort—with the caveat that they want to build personal ventilators with a $100 target price.

LOOKING INTO THE FUTURE

While the uncertainty remains along with the anxiousness about the inability to know how long this situation will last and what the lasting effects will be on the industry from a different perspective.

So when there are so many speculations about how the industry will be reshaped, the global auto industry has could have many benefits from a relaxation of regulations, as governments try to revive national economies. Followed by this is the slump in crude oil consumption which is driving lower gasoline prices, which in turn could generate more sales of SUVs and small trucks—the industry’s highest-margin offerings which the car brands in India can benefit from.

TOP INDIAN CARS IN 2020

• New-Generation Hyundai Creta: Launched in March 2020, priced between 10 lakh and 17 lakh, the new Creta offers 1.4-litre Kappa Turbo-GDi petrol mill that churns out 140PS and 242Nm of torque, and is offered with a 7-speed DCT.
• Tata Gravitas: To be launched in the first half of FY2021, priced at 15 lakh, Tata Gravitas is a 7 seater SUV which comes with a BS6-compliant 2.0-litre engine that develops 170PS and 350Nm.
• New-Gen Mahindra XUV500: Launch expected in early next year, XUV500 at a starting price of Rs 12.3 lakh, which goes up to Rs 18.62 lakh (ex-showroom).
• MG ZS Electric SUV: Touted to be first electric internet SUV in India, the MG ZS Electric SUV has a starting price at Rs 19.88 lakh (excite variant, ex-showroom, New Delhi)