Auto Industry Hit by COVID-19

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As the world continues to battle with coronavirus, the auto industry in India fears a stumbling supply chain.

By Ishika Dangayach

There is fear in the automobile industry in the country as the supply of auto components from China has been disrupted because of the coronavirus outbreak there.

Sundaram Motors, dealer of Mercedes Benz said, “There is a disruption in the supply of the components from china but we do not see major impact as of now.  However, the possibility of high risk still exists, as things can change rapidly. We are just focusing on having enough supply for the near future.”

As China accounts for 27 percent of India’s $4.8 billion worth of auto-component imports, the spread of coronavirus (COVID-19) through China and South-East Asia is likely to be adverse for the automobile industry in India, rating agency Information and Credit Rating Agency of India Limited (ICRA) said in a statement on Wednesday.

In a press conference, the Vice President of Corporate Sector Scores, ICRA, Shamsher Dewan showed concern over India’s automobile supply chain as China’s manufacturing business is hit by Coronavirus. He said, “The effect for heavy-value added and personalized parts is expected to be higher, whereas commoditized goods may migrate to alternative suppliers. But for an imminent change to new vendors, the large cost and development time involved in developing tooling remains the primary prohibitive consideration.”

 The recent report released by the Flitch Solutions states that the vehicle production in India will decrease by 8.3 percent in 2020 as the industry is facing the supply shortage, due to suspension of shipments by sea in China.

As per the recent reports, t the commercial vehicles (CV), passenger vehicles (PV), and the segments of two-wheeler (2W) will be significantly affected.

According to the report presented by the ICRA, the Original Equipment Manufacturers (OEM) have decreased their output schedule for February and March due to the failure to obtain the components for manufacturing.

“Indian OEMs are unable to plan production outside the existing inventory as the Chinese government has stopped the sea shipment whereas the air only shipment is not ideal for the automotive parts,” Dewan said. China is among the major manufacturer of automobile parts worldwide— thus exporting about $35 billion of parts in 2018, as UN data show. India imported $4.6 billion worth of products from China in the financial year 2018-2019, which accounts for 27 percent of overall imports into the world. India’s imports from China is estimated at $2 billion in the first half of the current fiscal year.

Raghu D., a business analyst said, “China is the biggest manufacturer of the automobile part, due to the outbreak of the virus it will directly affect the market and increase the price of the automobiles in the country. Witnessing the current scenario, the rate of reduction in supply is higher than the rate of reduction in demand.”

However, the Indian government has issued a notification mandating decontamination of containers at the port before release to the Indian Customs.

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