Covid-19: Auto industry is losing ₹2,300 crore a day

The Society of Indian Automobile Manufacturers (SIAM) on Monday said that overall auto sales fell 45% in March as the spread of Coronavirus hit demand. The government has announced a 21-day nationwide lockdown, which commenced on March 25, to contain the spread of the virus.

The industry body estimates that the automobile industry is losing ₹2,300 crore every day due to closure of production. For an industry that is going through a slowdown, this comes as an additional blow. The number of Coronavirus cases in India has already crossed the 9,000-mark.

The auto industry has seen falling sales for more than a year due to low consumer sentiment. Transition to BS VI emission norms and a slowing economy are some of the reasons behind it.

“The automobile industry witnessed one of its sharpest declines in domestic sales in March 2020 due to subdued demand and consumer sentiments which were further aggravated by the Covid-19 outbreak in the country,” said Rajesh Menon, director general, SIAM.

In March, sales of passenger vehicles, the largest segment by volume, fell 51% over a year to 143,014 units. Sales of two-wheelers also dropped 39.83% to 866,849 units during the month from 1,440,593 units a year ago.

Rajan Wadhera, president, SIAM, said, “March 2020 was one of the most challenging months for the auto sector, as the 21-day lockdown resulted in bringing the production and sales of vehicles to a standstill in the last week. As the revenues took a severe hit, the OEMs (original equipment manufacturers) struggled on meeting fixed cost and working capital requirements.”

Wadhera said that the industry was already reeling under severe de-growth and the pressure of a disrupted supply chain, followed by a majority of the auto companies announcing a shutdown of their manufacturing units in the last week of March, due to concerns over ensuring workplace safety and the health of their employees.

According to SIAM data, the industry sold 1,050,367 units in March as compared to 1,908,097 units a year ago. The commercial vehicles segment, which includes medium and heavy and light vehicles, suffered the steepest fall. It sold 5,645 units last month—a drop of 87.07% over a year.

Overall production, too, went down by 33.61% and the industry exports also fell by 24.51% in March.

“The auto industry is engaged in a dialogue with the government of India on policy measures, which could minimise the impact of Covid-19 on the Indian economy and especially on the Indian automobile industry. There would be challenges on the supply side; demand-side and also on the issue of availability of finance, which would all need to be addressed to bring back growth in the sector. We remain steadfast on building the nation responsibly,” Wadhera said.