Auto industry stares at $2 bn loss, as factories and dealers shut shop to stem Covid-19 contagion

Source: The Economic Times, Mar 24, 2020

Mumbai | New Delhi: The automotive industry is expecting a loss of 7.5 lakh units in production and $2 billion in revenue in March alone because of the lockdowns to combat the Covid-19 outbreak. Despite the tough business environment, several automakers ET spoke to said they would not lay off any permanent or temporary workers. The government has also told India Inc to not cut jobs or salaries.

Production has come to almost a standstill, as state governments have imposed lockdowns and companies themselves shut their factories to help break the chain of the coronavirus outbreak. Since these measures will remain in place at least until the end of March, companies are sure to lose a third of the output for the month. And, more than half a dozen industry executives and experts ET spoke to said even an improvement in the Covid-19 situation wouldn’t bring much respite to the industry in April as it would take a while for consumer confidence to become normal.

Mahindra & Mahindra managing director Pawan Goenka said pretty much everything would be shut down in the coming few days. “These are unusual times and we need to conserve cash, and Mahindra is looking at multiple ways to deal with the situation,” he said.

“One really does not know when things will return to normal. But going by the experience of China, Korea and other markets, at least a month of business is likely to be disrupted,” he said. “There will be a period of time when companies won’t be generating revenue and there will be some level of fixed expense that is incurred and that will drain the P&L for everyone. Nobody is spared.”

Tata Motors was the first to announce, on Friday, that it was shutting several plants. It was followed by Mahindra, Maruti Suzuki, Hyundai Motor India and Toyota Kirloskar on Sunday. Kia Motors, Renault Nissan Alliance, Yamaha Motor and TVS Motor from the southern automotive belt on Monday said they too would suspend production. Suzuki Motor Gujarat also announced shutdown from Monday.

Toyota Kirloskar Motor senior vice-president Naveen Soni said the local administration in Bidadi, Karnataka, had permitted operations at its plant with 50% staff on alternate days. But given the gravity of the situation, the company voluntarily decided to halt manufacturing operations completely till further notice, he said.
Dealerships are also shut in districts that are under lockdown. Those elsewhere are getting few visitors, said industry executives.

Crisil Research director Hetal Gandhi said production shut down 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,” added Gandhi.

The estimated production shortfall in March includes more than 1 lakh cars, 12,000-15,000 trucks and over a half-million two-wheelers, said several people tracking the sector.

While sales are usually high in March for the automotive industry, it was different this time even before the current situation arose. Production was estimated to be 1.8-1.9 million units across segments this month as against 2.1 million units produced a year earlier, as companies were preparing for the transition to Bharat Stage-VI emission standards that come into effect on April 1. Automakers were also facing shortage of components from China, where factories were shut for much of January and February due to the corona virus outbreak.

Govt plans to airlift auto parts from China to ease shortage

Source: LiveMint.com, Mar 04, 2020

New Delhi/Mumbai: The Union government is exploring the possibility of airlifting automotive parts from China to ease a shortage caused by the closure of factories there due to the Covid-19 epidemic, said three people directly aware of the development.

In line with the plans, the ministry of heavy industries, the nodal ministry for the auto sector, has prepared a list of crucial parts for petrol and diesel as well as electric vehicles that can be airlifted from China in consultations with automakers and industry body Society of Indian Automobile Manufacturers, the people said, requesting anonymity. Read the rest of this entry »

EESL inks pact with BSNL for 1,000 EV charging stations across country

Source: Business Standard, Feb 18, 2020

New Delhi: State-owned Energy Efficiency Services Ltd (EESL) on Tuesday said it has signed an initial pact with BSNL for installing charging stations for electric vehicles.

As per the Memorandum of Understanding (MoU), EESL will set up public EV charging stations at 1,000 BSNL sites in a phased manner across the country, an EESL statement said.

EESL will make the entire upfront investment on the services pertaining to the MoU, along with the operation and maintenance of the charging infrastructure by using qualified personnel.

Telecom PSU BSNL would be responsible for providing the requisite space and power connections for installing the charging infrastructure. Read the rest of this entry »

Commercial vehicles, two-wheelers likely to see a smooth drive from H2

Source: Business Standard, Feb 11, 2019

Chennai: Commercial vehicles (CVs) and two-wheelers, after clocking big growth in January 2018, have reported a decline of 14.04 per cent and 16.06 per cent, respectively, in the same month this year over the equivalent period in 2019.

CVs and two-wheelers reported 39 per cent and 33 per cent growth, respectively, in January 2018 over the same month in 2017.

The two segments continue to feel the pressure of slowdown in rural sales and changes in regulations, among other things.

Industry representatives have said from the second half of the year, they hope to see revival because the rural economy is looking up and the projects the government has announced.

According to the wholesale numbers Society of Indian Automobile Manufacturers has given, CV sales were 61,305 units in January 2017, 85,660 units in January 2018, and 87,591 units in January last year. However, they dropped to 75,289 units in January this year.

Two-wheeler sales, which rose to 1.68 million in January 2018 from 1.26 million in January the previous year, started falling since January 2019 (1.59 million) to 1.34 million in January this year.

Factors that affected sales of CVs are: Slowdown in infrastructure spending, drops in freight rates, revised axle-load norms, goods and services tax rates, crisis in non-banking financial companies, and emission norms.

Ashok Leyland expects the M&HCV (medium and heavy commercial vehicle) industry would close 2019-20 with sales of around 200,000 units, a drop of nearly 46.23 per cent over last year. However, it hopes things should revive.

Vipin Sondhi, managing director and chief executive officer (CEO), Ashok Leyland, said the Union Budget’s allocation of ~2.83 trillion for agriculture, irrigation, and rural development would help CVs because it would lift the rural economy. The Budget’s proposal to spend ~100 trillion on infrastructure over five years would create demand for CVs.

Rajan Wadhera, president, SIAM, and president, (automotive sector), Mahindra & Mahindra, said “sales of vehicles continue to be stressed due to rising costs of vehicle ownership and slower growth in GDP. We are hopeful that the recent announcements of the government on infrastructure and rural economy would support the growth of vehicle sales, especially in commercial vehicles and two-wheelers”.

K N Radhakrishnan, TVS Motor president, CEO, and additional whole-time director, recently said in an investor call that while the first half (for two-wheelers) might see a decline, rural sentiment was positive, and agriculture should do well.

Niranjan Gupta, chief financial officer (CFO), Hero MotoCorp, said the two-wheeler industry continued to face challenges amid an overall economic slowdown. Early indicators, such as a positive rabi crop, augur well for the rural economy, which is likely to help the industry.

“We expect to see a turnaround in the second half of FY21),” said Gupta. Motilal Oswal estimates 6 per cent volume growth for two-wheelers in 2020-21.

Vehicle sales still in the slow lane in January

Source: The Hindu Business Line, Feb 10, 2019

New Delhi: Wholesale passenger car sales in the domestic market continued to fall, declining 8 per cent year-on-year (YoY) in January to 1,64,793 units compared with 1,79,324 units in the corresponding month last year.

However, the utility vehicles segment maintained its momentum and reported a growth of more than 2 per cent to 84,929 units during the month against 82,803 units in January 2018.

According to the latest numbers put out by the Society of Indian Automobile Manufacturers (SIAM), the total passenger vehicles sales during January declined 6 per cent to 2,62,714 units compared with 2,80,091 units in the same month last year. Read the rest of this entry »

OEMs bet on collaborations to ensure sustainability

Source: LiveMint.com, Feb 07, 2019

NEW DELHI: With disruptive technologies such as electric and hybrid adding to the woes of automakers amid a demand slowdown, one theme rang out clear among manufacturers at the Delhi Auto Expo—the need for more collaborations.

Apart from just developing technologies, carmakers are now trying to leverage suitable platforms, assembly lines and merge component sourcing divisions, to cut costs and improve profitability amid stagnant demand.

The concept an automobile itself has changed because of rapid evolution in technology—whether it be electric, automated, connected or shared. This means manufacturers have to offer consumers a wide range of choices in mobility, said Naveen Soni, senior vice-president, Toyota Kirloskar Motors. Read the rest of this entry »

Volkswagen to invest Rs 8,000 crore in 2nd bet on India

Source: IBEF.org, Feb 05, 2019

Volkswagen (VW) plans to invest Rs 7,900 crore (US$ 1.13 billion) despite the present slowdown in the Indian market. This will be companies second investment in the country focused on taking a market pie, which is considered as one of the bright spots in the global automotive world.

The company plans to launch SUVs, sedans, electric vehicles and mini cars in the next few years to succeed in India this time after many failed attempts. VW plans to beat the competition by becoming completely local, said, Mr Bernhard Maier, the global CEO of VW. Currently, Skoda is the leader in the segment.

Mr Maier added, “India is one of the most promising markets in the world, but it is also one of the most competitive. We want to be hyperlocal here this time and get the right products at the right prices to win our share here”. The company launched two new SUVs in India. 

Skoda, which arrived in the country in 1999, has been the oldest company in the group, while, the parent company VW matrix arrived around 2010 with an investment of US$ 1 billion.

Although, the company achieved a low single-digit number against its 20 per cent target. The partnership along with other companies like first with Japan’s Suzuki (who owns Maruti) and then with the local player Tata Motors didn’t led to any positive result leading the company to go solo for its second start.

Mr Maier said the cars from the new platform will carry a high degree of location, approximately more than 90 per cent helping the company to remain competitive. 

To take on the SUV segment, company plans to launch Taigun whereas on the other hand, Skoda’s car from the same platform presently offers the code name Vision IN. This will mark the company’s entry into the smaller-sized SUV segment, which has been one of the most popular categories in the market.

Though, the Indian market provides opportunities for global car manufacturers, policy certainty is required from the side of the government. The company also plans to introduce electric cars in line with government policy. Though, Mr Maier added that first issue of charging infrastructure and buyer subsidies need to be addressed then the company will enter the market.