Coronavirus has shaken the world. The mere mention of Coronavirus sends shivers down our spine. The disease that has its origin in China’s Wuhan has now spread to 20 countries, including India. According to reports, the death toll in China, as on February 9, 2020, stood at over 800 and this number is rising rapidly.
Coronavirus is reported to be worse than SARS (SARS killed 774 people worldwide), which also originated in China, and it might take longer to recover this time. The Chinese economy is reeling from its slowest growth in three decades; with Coronavirus, it only gets worse.
While several industries are going through a tough time, it is the auto industry that has come under immense pressure since Wuhan is a top auto-industry hub, along with Shanghai and Guangzhou. Over half of China’s auto hubs are currently shut until a week after Lunar New Year, due to the Coronavirus outbreak. This is likely to disrupt production and export of auto parts used world over.
Will China’s Coronavirus Impact India’s Auto Industry? Let us find out.
Severe slowdown in India’s automobile industry, since 2019
Burdened by a slowing economy, the Indian consumers were less receptive last year to spending big money. According to the Society of Indian Automobile Manufacturers (SIAM), car sales in India dropped by 19%, in 2019 to 1.18 million from 2.24 million in 2018.
And it predicts there won’t be much of a change this year, due to weak demand and tighter emission norms. With India moving to BS-VI emission norms from April 2020, the prices of cars are expected to go up. The passenger vehicle segment’s goal of touching the 5-million mark by 2020 seems like a distant dream.
Will the Coronavirus impact India’s auto sector?
Since several of the top automobile manufacturing units operate on ‘just in time’ principles, the inventory of parts from China, the biggest auto manufacturing hub for the world, could dry up fast.
According to India’s top auto company, Maruti Suzuki, the problem for them could arise if the coronavirus outbreak is not contained in the next few months. While several of their vendors rely on raw materials and components from China, there is no urgency as of now. They have inventories for a month or so, and are also looking out for alternatives.
However, MG Motor feels it’s a grave situation. According to a report in a leading news publication, this is what Rajeev Chaba, MD, MG Motor had to say. “Supply chain is getting disrupted globally. Right now, the production is going but if (factories) don’t open in the next few weeks, a shortage could arise.”
The sales are set to be hit in February after China extended its Lunar New Year holiday. As of now, MG Motor is dealing with stretched inventories. MG Motor has 18,000 bookings for Hector and 2,400 bookings for ZS EV.
Mahindra & Mahindra and Tata Motors feel the Coronavirus would hit the production of some vehicles, since they import some components from China. Tata Motors recently said that Coronavirus could affect production of Jaguar Land Rover. They added that the outbreak could impact their profit margin forecast of 3% for JLR, in 2020.
BS-IV in a Jam
Mahindra & Mahindra feels if this does not improve, it will be difficult to conclude sales of BS-IV vehicles by March. They may have to request the Supreme Court to extend the deadline, in case such a situation arises. Introduced in 2000, the Bharat norms are emission control standards based on European regulations. BS-IV compliant vehicles were made compulsory in April 2017, wherein only 50 parts per million sulphur content is permitted.
Auto Expo 2020
2020’s edition of India’s biggest Auto Expo, currently on in Greater Noida, has been affected by the Coronavirus outbreak. China-based manufacturers, including MG Motor and FAW group are primarily represented by their Indian counterparts. Despite the fear looming large, visitors were seen attending the biennial event in large numbers!
Government officials feel all is not lost – they are optimistic that there won’t be any large-scale disruption. It’s all a wait-and-watch situation now!