Impact of COVID-19 to Automotive Companies & Dealerships in India
Since World War, the coronavirus (COVID-19) pandemic is defining the global health crisis of our time and the extreme challenge the humanity have faced. The emergence of the Novel Coronavirus (COVID-19), which originated in Wuhan, China in late last year, is fast spreading its limbs across the world. Coronavirus cases are rising daily in the Americas, Europe, Asia, Africa and Australia and are having a major impact on all aspects of society that will leave deep scars, including the automotive industry. Countries across the globe are racing to mitigate the spread of the virus by taking several measures including testing and treating patients, limiting travel, carrying out contact tracing, cancelling large gatherings and quarantining citizens. The COVID-19 has now infected millions of people globally with the death toll surpassing 1 million. Several cities are deserted as people stay indoors, either by choice or by government order. Across the world, corporates, industries, transport, shops, theatres, restaurants, all are closed, except the essential ones.
COVID-19: Impact on Indian Automotive Industry Stakeholders
In order to contain the coronavirus pandemic in India, the country has imposed a 21-day nationwide lockdown, which has had a devastating impact on the automobile sales in March 2020 as the automotive companies & dealers have shut down their operations in sync with government advisories, to keep its workforces safe. Automobile and component manufacturing plants have been shuttered across the country, consumer footfalls in showrooms have fallen sharply, resultant vehicle sales dropped dramatically. Since these measures will remain in place at least until the end of April, automotive industry is sure to lose a third of the output for the month. And, as per industry experts and executives perspective, with even an improvement in the COVID-19 situation; it wouldn’t bring much relief to the automotive industry in following months as well, as the industry would take a while for consumer confidence to become normal and start visiting the showrooms.
The major automotive companies of the country, including Maruti Suzuki India, Mahindra and Mahindra, Hyundai Motor India, Tata Motors, Renault Nissan Alliance, Toyota Kirloskar, Honda Cars India, Bajaj, Hero, Yamaha and TVS Motor have decided to halt manufacturing operations completely till further notice; hence the production has come to almost a standstill. Further, the dealerships are also closed; the industry has further experienced a sharp decline in the vehicle sales during the last few weeks. It is expected that due to the lockdowns to fight against the COVID-19 pandemic, the automotive industry would witness a loss of almost US$ 2 billion in revenue and nearly 750,000 units in production in March alone.
Top Car Makers Vehicle Sales Comparison March 2020 vs. March 2019
- Maruti Suzuki India domestic passenger vehicle sales declined 47.4% to 76,240 units in March 2020 whereas the company had sold 145,031 units in the same month last year
- Hyundai Motor India sales declined by 40.70% to 26,300 units in March 2020, compared to that of 44,350 unit sales in March 2019
- Honda Cars India sales dipped down to 3,697 units in March 2020 from 17,202 units in March 2019, a dip of almost 80%
- Toyota Kirloskar Motor's domestic sales plunged 55% to 7,023 units in March 2020 from 12,818 units in March 2019
- Mahindra and Mahindra passenger vehicle sales declined 88% to 3,384 units in March 2020 from 27,646 units in March 2019
- Tata Motors domestic passenger vehicle sales declined 68% to 5,676 units in March 2020 from 17,810 units in March 2019
Top Car Makers Vehicle Sales - March 2020 vs. March 2019
The production shutdown might continue well into the first quarter of fiscal 2021 staring April, as sentiment remained weak. “We expect the Q1 to be a washout for the industry and we don’t expect the market to recover in the next financial year. Given the environment, at best, passenger vehicles and two-wheelers may register flattish growth. However, commercial vehicles will continue to decline next financial year.” In March 2020; the estimated production shortfall includes more than 0.1 million cars, 12,000-15,000 trucks and over a half million two-wheelers. While the vehicle sales are usually high in March for the industry, it seems different this time even before the current situation arose. Production was estimated to be 1.8-1.9 million units across the segments in March, 2020 as against 2.1 million units produced last year, as the companies were preparing for the transition to Bharat Stage-VI emission standards that come into effect on April 1, 2020. All through January and February, the auto manufacturers and their suppliers have been scrambling to keep up their production lines buzzing, as they were facing shortage of parts and components from China, where the factories were closed since January and February due to the coronavirus outbreak. In addition, COVID-19 will also impact all the stakeholders in the value chain who will experience both medium and short term impact, including shortage of raw material, shifting of production to other regions, liquidity crunch to delays in availability of models, delayed launch and decline in consumer demand.