COVID-19: Auto Industry seek government support to restart

Industry bodies SIAM, ACMA and FADA jointly urged the government to help the sector ecosystem to get back to where it was two months ago. Few OEMs secured permission to restart plants-this looks difficult considering the supply-chain constrain.   

The Indian automotive sector just reported almost zero sales in the month of April, as the country is under severe lockdown- thus rendering all the economic activities to a complete halt. More than 40 days of lockdown thus far, which has helped India to control the spread of the deadly virus. Despite strict unprecedented measures the larger risk still persists. The government is closely monitoring the situation across India to ease things for the larger populations and ensuring people get back to work as much as possible. 

However, the economic cost of the COVID-19 is still unfathomable, and businesses are looking to open gradually which is necessary for normal life to start getting back where it was two months ago.

The automotive industry like the rest of the industries also remains shut with plant closure and zero retail sales. To get back the manufacturing activities the government has permitted some companies in various states to start production. Few automotive OEMs have secured permission to re-start production, yet this looks increasingly challenging unless the entire automotive ecosystem starts to function.

This is necessary as OEMs plants are highly dependent on component supplies and other support from various stakeholder including getting the necessary workers to the plants. Ashok Leyland is among the truck manufacturers who got permission to restart some of its plants with all the necessary safety measures in place.

Industry bodies seek support

Considering the urgency to start production and get the industry gradually back to normal, industry bodies have urged the government to support the larger automotive ecosystem to commence operation. The Society of Indian Automobile Manufacturers (SIAM), The Automotive Component Manufacturers Association of India (ACMA) and The Federation of Dealers Association (FADA) have written jointly to the government seeking support to re-start the entire automotive ecosystem in unison.

The Automotive industry already facing a slowdown for more than a year, with the lockdown, it is now confronted with total disruption of its entire value chain. The sector is losing Rs 2,300 crore per day due to lockdown. To start the economic activities in the sector is critical and the only hope to infuse the economy back to normal.  

According to the Industry bodies, the automotive value chain is highly complex, integrated and interdependent. A vehicle manufacturer can not start operation if any one of its suppliers is unable to undertake production. Further, production for a vehicle manufacturer would only amount to adding to inventory and thus blocking working capital in case dealers are unable to sell the vehicle.

It is, therefore, pertinent to note that, if any element, in any segment doesn’t start operation the value chain wouldn’t able to work. It also urged the government that the automotive industry needs to be treated akin to essential services and be allowed to function as has been done in the case of some other sectors of the economy.   

Truck Transport essential

The transportation of trucks is also critical for ensuring essential supplies are moved across the length and breadth of the country. The transport sector is among the key element in the process of getting back the economic activities as truckers are critical in restoring the supplies across the country. Trucks are helping small businesses and industries to get the vital supplies to keep them running. This will further accelerate the movement of cargo delivery across states borders as the larger economy starts to open up gradually. 

Read More: COVID-19: Supply chain restoration is vital for plants to restart, says Ashok Leyland