World's largest automobile component manufacturer Bosch on Friday said the Indian automobile industry may take up to six years to get back to peak volume levels of 2018-19 and needs incentives from the government to recover faster.
While announcing its financial results for fiscal 2020, Bosch Ltd said it has so far managed the downturn well but foresees a very difficult and challenging year in 2020-21 when demand may contract by up to 30 per cent. Sales in automobile industry in 2019-20 had contracted by 17 per cent, the worst in over two decades.
"This is the most challenging time we will ever see in our lifetimes," said Soumitra Bhattacharya, managing director, Bosch India. "In the near term, the situation will be very painful but in the medium term I anticipate a quick rebound for India as well as for our company while in the long term this remains one of the markets to be in."
"We were struggling even before COVID-19 hit us. We were losing about three-four years due to the slowdown in terms of industry volumes," he said. "Now you can add another one-two years to that. So, we are looking at well beyond 2024 for a full recovery. All of that of course changes if government acts fast and announces some sops for the industry or if GDP grows really fast. They should as automobile industry is a huge employment generator."
For 2019-20, Bosch registered a 18.6 per cent decline in revenue at Rs 9,842 crore while profit before tax (PBT) from continuing operations and before exceptional items declined by 29.9 per cent to Rs 1,636 crore. Profit After Tax (PAT) from continuing operations stood at Rs 730 crore before exceptional tax items. The impact of deferred tax assets, due to exercising the option of a concessional tax rate of 22 per cent plus applicable surcharge and cess for domestic companies has been defined as an exceptional item.
During the FY 2019-20, the company has made a provision of Rs 717 crore, towards various restructuring, reskilling and redeployment initiatives. "These provisions are in line with the company's transformation initiatives and has been made to capitalise on opportunities emerging in electromobility and other mobility related projects," it said in a statement.
During the year, the company's capital expenditure stood at Rs 399 crore with major spend on expansion of its Bidadi plant and Adugodi campus.
"We have been spending at an average Rs 350-500 crore every year but this year we are deferring all non-essential spends," Bhattacharya said. "So you can say capex would be 40-50 per cent less."
The company said it would not lay off or cut salaries of its employees but there maybe some "redefining" of role for some. On the issue of reverse migration of labour force that is happening across the country, Bosch said it does not impact the company directly but may play out at some of its vendors, which could then have an impact.
"We do not employ any migrant worker directly and even our level of contractual workers is quite low. So this has no impact on us directly," Bhattacharya said. "But our supply chain is facing this problem, yet this is not our most important challenge right now."
Bosch Limited's largest business vertical, mobility declined 24.4 per cent in 2019-20 with domestic sales declining by 25.9 per cent and export sales by 6.1 per cent. Within the mobility segment, the powertrain solutions business registered a decline of 30.2 per cent owing to low performing automotive market. Business beyond mobility solutions recorded a decline of 14.4 per cent.
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