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Coronavirus Pandemic Impacts India's Struggling Auto Industry, Vehicle Production Critically Disrupted

By: Arjit Garg

Edited By: Arjit Garg


Last Updated: March 12, 2020, 13:22 IST

Representative image.

Representative image.

The auto industry body said disruption in the availability of essential parts is likely to critically hamper production across all segments.

FY20 has been a tough year for the Indian automobile industry. After facing sales crunch due to GST and the upcoming BS-VI norms, vehicle production across all categories is critically hampered due to the Coronavirus Outbreak that originated in China. Many automakers in India import about 10 per cent of their raw materials from the neighbouring nation, as per auto industry body SIAM.

Since production of most plants in China and South Korea has been seized for indefinite period, Indian auto industry is facing it difficult to maintain an inventory. This, combined with the demand constraint due to BS-VI emission norms has created a ripple effect for the industry, which is unlikely to bounce back anytime soon.

"Manufacturers are exploring alternatives to fulfil their supply chain demands but that would also take a substantial amount of time to reach stable production scale as these components would need regulatory testing," said SIAM President Ranjan Wadhera in a statement.

Society of Indian Automobile Manufacturers (SIAM) has been in touch with the government with specific recommendations on behalf of the auto industry, he added.

While dealers across India were struggling to clear the stocks of older BS-IV vehicles for whom registration will close post 31st March, 2020, they are now struggling to get the supply of BS-VI vehicles. Not just weakened supply of new BS-VI vehicles, coronavirus is also keeping buyers away from showrooms, and automobile dealers fear that they would not be able to liquidate the BS-IV inventory before the month-end deadline.

According to automobile dealers' body Federation of Automobile Dealers Associations (FADA), things started to look under control till February-end until Coronavirus outbreak pushed the buyers away.

FADA also said that banks came out with notices that they would not finance BS-IV stock after specific dates in March, further impacting the confidence of the dealers and customers. "So, lot many things have come together and, now, suddenly there is fear among dealers that they won't be able to liquidate the BS-IV stock. At the start of March, we were reasonably confident that the problem of leftover stock would not be much," FADA President Ashish Harsharaj Kale told PTI.

FADA has received support from few states where banks have agreed to continue finance for BS-IV units till the March-end. "We have received some support from states like Punjab, West Bengal and Chhattisgarh. They have assured that they will open even on the weekends to clear the registration process," he added.

FADA now seeks legal remedy to clear the BS-IV stocks as Coronavirus has come into play. Earlier, Supreme Court ruled out any extension of the last date of BS-IV vehicle registration in the country. But since new factors have pushed the customers away, FADA hopes for an extension from the top court.

These are the only two options available with FADA right now, Kale said. "We will discuss with OEMs how do we do it (sell vehicles)? Should we bring in better schemes or the OEMs take the stock back and liquidate it somewhere else," Kale said.

If nothing works in favour of FADA/ Dealerships, any unsold BS-IV vehicle would end up as scrap after March 31 as from April 1, only BS-VI-compliant vehicles will be registered in the country. This will result in huge loss for the dealerships across country.

With Inputs from PTI