India's $120 billion automobile industry registered an unprecedented zero sales in the domestic market in the month of April as the lockdown in the country kept all factories and dealerships shut. The only business transaction registered by the companies included some small numbers for exports and sale of tractors that were exempted from the ambit of the lockdown as an essential part of agricultural activity. Market leader Maruti Suzuki managed to ship 632 units from the Mundra port after resumption of operations there. Mahindra and Mahindra also exported 733 units during the month. With the lockdown likely to be either extended beyond May 3 or relaxed with a number of caveats, the mood in the industry is sombre.
"At Mahindra, we are working hand in hand with all stakeholders, especially our dealer and supplier partners, to get our ecosystem started, once the lockdown is lifted. The safety of all our employees will be of paramount importance to us while resuming our operations," said Veejay Nakra, Chief Executive Officer, Automotive Division, Mahindra & Mahindra. "We are hopeful that our dealerships will open soon and have stocks to cover the first few weeks of sale. In the export market we have sold 733 vehicles during April."
Mahindra also sold 4,716 units of tractors in the domestic market last month and another 56 units were exported. Unlike other segments of the industry, the company said prospects for tractor sales on the back of a record rabi season, remain upbeat. "The extension of the national lockdown impacted the business, with dealers partially open for just a few days. Going forward, several positive factors including a good Rabi output, opening of procurement centres by the government, indication of good crop prices, reservoir levels etc., augur well for tractor demand," said Hemant Sikka, President - Farm Equipment Sector, Mahindra & Mahindra Ltd. "However, the rate of improvement will depend on how quickly the on-ground sales operations, including the start of NBFCs are normalised, following the relaxation of the lockdown. In the exports market we have sold 56 tractors."
Each passing day of the lockdown is adding to the woes of the industry. According to SIAM, manufacturers are clocking a revenue loss of Rs 2,300 crore every day and the cumulative figure for the month is in the vicinity of Rs 70,000 crore. Lack of business activity is also burning a hole in the government's pocket. The industry accounts for 15 per cent of GST, which amounts to an approximate Rs 28,000 crore and another Rs 14,000 crore foregone as state levies.
Resumption of operations even after the lockdown is relaxed is likely to be a long drawn out affair. Some of the automotive hubs in the country like the Pune-Pimpri-Chinchwad belt in the west are in the red zone that may not see any relaxation. This will however also impact other factories which are in the green zone as they are dependent on each other for components.
"It is going to be tough. Assembling a car is a very complex process and involves thousands of parts. If even one part is not available then the car cannot be made," says Rajesh Goel, senior vice president and director, marketing and sales, Honda Cars India. "We are waiting for government directions and have started preparing ourselves internally. All I can say for now is it will be a lengthy and slow process. Nobody can say when the industry will reach the situation of business as usual." Some are raring to go. MG Motor, which has a backlog of over 15,000 cars to be delivered to its customers, began operations and manufacturing on a small scale at its facility in Halol in Gujrat in the last week of April. It hopes that production will ramp up in the month of May and is working on the local supply-chain support. "We are gearing up for working as per new norms including sanitisation and social distancing. In the current scenario, our prime focus remains on health, well-being and training of its entire workforce including dealer employees, on new SOP (standard operating procedure)," it said. "The company continues to serve the communities around where it operates, in every possible way it can."In April 2019, the industry had registered sales of 2,001,096 units-1,638,388 units of two wheelers, 68,680 units of commercial vehicles, 46,262 units of three wheelers and 247,541 units of passenger vehicles.
Naveen Soni, Senior Vice President, Sales & Services, Toyota Kirloskar Motor says, "COVID crisis exacerbated the already prevalent pressures on the automobile industry but the challenges this time are multi-dimensional. The lockdown was absolutely necessary and a timely step taken by the Government to ensure the safety and well-being of people, however the unavoidable side effect of this medicine has been the severe adverse impact on the economic activity. As with many other sectors, with the closure of dealerships and manufacturing the operation of the automotive value chain has come to a grinding halt. Restart of the entire value chain cycle and its restoration will be gradual as the industry is faced with the challenges of low consumer sentiments, rebuilding of disrupted supply chains that need factors of productions to be restored that including return of workforce etc.
These are critical times and we were aware that there would be no wholesales in the month of April 2020. As we prep for a restart, we are working closely with our dealer partners to offer them the best support to re-stimulate demand in a safe and heathy atmosphere. When it comes to safety measures across the company, our supply chain and even at our dealerships, we have devised key guidelines in the form of a 'Restart Manuals' which can be adhered to whilst starting operations in both our factories as well as dealerships.
We are also happy to bring to your notice that there has been some movement in the market as dealers are receiving some enquiries and we will ensure that these customers are catered to as soon as we begin operations. To assist our customers who are home bound, we have made provisions to entirely digitalize the sales process wherein we have a 360-degree product views for the customer to take a virtual tour of the vehicle, select financing options and even receive a quotation online. We have also made provisions for delivering the vehicle to the customer's doorstep upon the completion of purchase. These provisions were envisaged to ensure that our customers are not inconvenienced at any point during the virtual purchase process. As a responsible corporate, our endeavour is to follow central and state government directives and work in concurrence with national guidelines on COVID."
Zero production also means the government's goods and services tax (GST) collections will take a hit of more than Rs 28,000 crore, apart from Rs 14,000 crore in other state levies