Indian auto industry stares at Rs 48,300 crore loss for 21 days closure of plants

The Indian auto industry will be very adversely impacted by the ongoing COVID-19 crisis. The shutting down of plants temporarily by all auto OEMs and component manufacturers across the country will trigger a loss of more than Rs 2300 crore in turnover for each day of closure.

In a terse note by the Society of Indian Automobile Manufacturers (SIAM), its president Rajan Wadhera noted that the Indian automotive industry will be majorly impacted by covid-19 and that “As per quick estimates by SIAM, it is expected that plant closure of Auto OEMs & Components will lead to loss of more than Rs 2,300 crore in turnover for each day of closure.”

Around March 21, 2020 just when the Indian auto industry had decided to down their shutters to safeguard their employees against the coronavirus disease or covid-19 till March 31, came the announcement by Prime Minister Narendra Modi that the entire country will be in a state of lockdown  for 21 days beginning March 25, 2020. That would mean that if and only if things go fine, business may get back to usual.

Even though many auto OEMs started their plant shut downs from March 22 onward, we shall just take into account the losses for 21 days of closure. By SIAM’s estimate that would mean a whopping Rs 48,300 crore of turnover.  This is just an estimate for auto OEMs and auto components business. The losses will mount further if one were to take into account other support industries like logistics, etc.

The initial list of Indian companies that temporarily shut down their production included Maruti Suzuki, Mahindra & Mahindra, Honda Cars India, Honda Motorcycle & Scooter India, Fiat Chrysler Automobiles (FCA), Hero MotorCorp, Tata Motors, Sonalika, Okinawa and Toyota Kirloskar. But with the PM’s fresh announcement, the entire country is in a lockdown that would include every auto OEM as well as component manufacturers in the country.

This closure of plants will add to the woes of the Indian auto industry which is already reeling under problems like sliding sales, transition related problems from BS IV to BS VI, a muddled auto policy that wants to promote electric vehicles at the cost of growth of IC engine vehicles, etc.

The government has not said anything about the issue related to transition of vehicles from BS IV to BS VI. In fact the Federation of Automobile Dealers Associations (FADA) President Ashish Harsharaj Kale had earlier mentioned that there are huge unsold BS-IV inventory and with the coronavirus (Covid-19), sales had come to a standstill.

Even before the nation went into a lockdown, there was a drastic drop in sales and customer walk-ins were reduced to a trickle. Counter sales fell by 60-70% across auto dealerships much before the lockdown.

Kale noted that many FADA members may face dealership closures if left over with unsold BS-IV stocks. He said that FADA had approached the Supreme Court with a request for permission of sale and registration of BS-IV vehicles till 31st May’20.