With the entire industry reporting zero sales in April, the domestic automobile sector has written to the government seeking relaxation from the lockdown to ensure full resumption of operations to the entire value chain.
The government on Friday extended the period of lockdown by another two weeks till May 17 but has provided a number of caveats to ensure resumption of economic activity in the country. The automotive industry however wants the entire value chain, which includes factories of all component makers, vehicle and two-wheeler manufacturers as well as dealerships, across the country to be allowed to open in one go for the industry to become functional again.
"The automotive value chain is highly complex, integrated and interdependent. A vehicle manufacturer cannot commence operations if any one of its suppliers is unable to undertake production," says a letter addressed to Home Secretary Ajay Bhalla written jointly by the three industry bodies - Society of Indian Automobile Manufacturers (SIAM), Automotive Component Manufacturers Association (ACMA) and Federation of Automobile Dealers Association (FADA).
"Further production for a vehicle manufacturer would only amount to adding to inventory and thus blocking working capital incase dealers are unable to sell vehicles. If any element in any segment does not commence operations, the value chain will not be able to re-start."
The industry, which accounts for 7 per cent of the country's GDP, 49 per cent of manufacturing GDP, 15 per cent of GST, and employs over 3.7 crore people directly or indirectly, has been in the grip of an intense slowdown for over 15 months, which has only been exacerbated by the coronavirus-induced lockdown. The industry is witnessing a revenue loss of Rs 2,300 crore per day.
"With challenges of working capital across the sector, several of the players in the industry, right from the component suppliers to the dealerships, are faced with the challenge of staying solvent. Starting of economic activity in the sector is therefore critical and the only hope to infuse life back into this once vibrant industry," the letter says.
"April will be a month which the entire automobile industry would like to forget and implore that such a time never comes again in future," said Ashish Harsharaj Kale - President FADA. "This is the first time ever in the automobile history that there has been no sales/zero sales, it is a difficult moment for all of us in the automobile community. We look forward towards opening of the lockdown and resuming the business again at the earliest."