EFFECTS OF COVID-19 ON THE AUTOMOBILE INDUSTRY

The outbreak of the coronavirus has had a severe impact on the industries globally. The triggered effects that can clearly be noticed in the financial markets. This pandemic has caused worldwide destruction and a setback to the economy of the most powerful Nations. As it spread its tentacles across the countries, one of the most distressed industry has become the automobile industry. The effect on the automobile industry can be considered to be a barometer of a country's economy. It can surely be said that this has been negative for India.

The first outbreak was seen to be in Wuhan in China. China accounts for a total of 27% of the automobile part in ports in India, the major auto part makers to be situated in Hubei province i.e Robert Bosch GmbH, Valeo AS and ZF Friedrichshafen AG. All of these have seen complete shut down in the past few months. According to the China association of automobile manufacturers (CAAM), the impact on the industry is so serious that it has caused financial breakdown of the automakers and thus caused ripple effect on the other automotive markets including the Indian industry to come to a halt. Future of crucial automobile parts like fuel injection pumps, EGR, modules, electronic components, turbocharger, airbag components are non domestic and imported from China which have now limited the production of vehicles. The option here seems to be to switch to an alternate supplier outside China which seems pretty difficult because this cannot be sudden. The government needs to formulate action plans to acquire multiple vendors on global scale rather than limiting imports from one region entirely. 

This march has seen a sharp drop in the Indian automobile industry. Due to the long term along with the BS VI transition has lead to the OEMs steep fall, supply chain disruptions, and production halt. In case of PVs, OEMs like MSIL, Hyundai and Toyota have performed better than its peers because of the early shift to BS VI and low BS IV inventory. The sales of MSIL has declined by 48% whereas those of Toyota and Hyundai have by 45% and 41% respectively. In 2Ws, OEMs were facing issues over the existing BS IV which was further deteriorated by the lockdown. MHCV experienced the highest jolt because of the previously planned BS VI transition. The tractors sale is the only better performer because of the localisation and have only declined by 27% against the 40% decline of PVs, 2Ws and MHCVs.

The Indian auto sector has so far seen of 80% decline and according to a report in Fitch Solutions-vehicle production in India is likely to contract by 8.3% in 2020. India took a span of seven years to increase its market from 3 to 4 million but the next step i.e 5 million was supposed to be in less than 5 years and India would be world's fourth largest passenger vehicle market by 2021. All of this has been seriously disturbed by the pandemic. in the financial year 2021 the total car sale in India is predicted to be 20.43 lakhs.

Another important event that was shutter due to it was the the 2020 Geneva Motor Show supposed to beopen on march 5 which is the biggest show on the global automotive calendar. in China the business in this industry went down by 92% in the first half of February year on year where as it was down by 47% in the first half of march year on year. Thus we can say that it may bounce back soon after this. The demands have seen to be resurfaced swiftly post lockdown.

The silver lining that can be predicted here is that after the lock down there will be an increase in personal usage of cars as compared to shared mobility going to infections and safety concerns of people. China will not be trusted in the market after this. it has been the hub of the automobile supply for a long time now, and in the process of decreasing the risk other countries will look for alternative sourcing channels. It is here that India pitches in. This is a massive opportunity to grab business from China. even if there is a 2% increase in the market share it will account to over 10 billion dollars in revenue. To grab this opportunity India needs to increase its level of production and supply to meet global standards through a systematic approach. government should continue to give a push to electronic vehicles and come up with definite business plans.