Automobili Lamborghini luxury car sales in India jump by 86pc in 2021

Source: Economic Times, 19 January 2022

Italian super luxury carmaker Automobili Lamborghini on Wednesday reported its best ever sales performance of 69 units in India in 2021, a growth of 86 per cent over the previous year. 

The company, which sells a range of super luxury cars with prices starting from Rs 3.16 crore in India, had sold 37 units in 2020. 

It had started 2021 with eyes set on beating its best-ever performance in the country recorded in 2019 when it sold a total of 52 units. 

Commenting on the performance, Automobili Lamborghini Chairman and CEO Stephan Winkelmann said, “This record has provided confirmation of four factors for us — the solidity of our strategic plan, our brand’s outstanding international reputation, the competence and passion of our people and the exceptional professionalism and dynamism shown by our l73 dealers in 52 markets, who have continued for invest alongside us at a challenging, uncertain lime.” 

In the Asia Pacific region, China which has become the company’s second biggest market clocked sales of 935 units with a growth of 55 per cent, while South Korea recorded 354 cars (up 17 per cent) while Thailand and India reported sales of 75 cars (32 per cent) and 69 cars (86 per cent), respectively.

“The remarkable performance of the four markets comprise 63 per cent of the total cars delivered within the Asia Pacific region in 2021,” Automobili Lamborghini said. 

Automobili Lamborghini Asia-Pacific Regional Director Francesco Scardaoni said 2021 was “an incredible year” for Lamborghini in Asia Pacific region despite the challenges posed by the global pandemic. 

“This year, we will continue to introduce an exciting range of Lamborghini models as well as bringing unparralleled driving experiences to our discerning clients and enthusiasts,” he added. 

In terms of individual markets, the US held on to top spot in 2021 with 2,472 units, a growth of 11 per cent, while China leaped into second place with 935 units followed by Germany 706 units with a growth of 16 per cent and the United Kingdom, 564 units, up 9 per cent.

“There was also an increase in the figures for Lamborghini’s home market of Italy, where 359 cars were delivered in total, a growth of 3 per cent,” it added.

In terms of models, the company’s super luxury SUV Urus topped the charts with 5,O21 units delivered. It was followed by the V10-powered Huracán, with 2,586 units. In addition, there were 798 Aventadors (V12 model) delivered all over the world, the company said. 

year, thanks to a substantial order portfolio that already covers almost the entire production planned in 2022. Lamborghini plans to unveil four new products over the next 12 months. 

Auto parts company ZF announces start of commercial vehicle solutions division

Source: Economic Times, 19 January 2022

Global auto component major ZF on Monday announced the start of its commercial vehicle solutions (CVS) division, which combines the company’s former commercial vehicle technology and commercial vehicle control systems divisions into one, with e􀀀ect from January 1. Commercial Vehicle Control Systems was formed following the acquisition of WABCO in May 2020.

The new division combines ZF’s expertise in the commercial vehicle (CV) industry and will signi􀀁cantly advance solutions for safe, sustainable and digitized transport, the company said in a statement.

“With the new CVS division, ZF is now positioning itself as the world’s largest component and system supplier for the commercial vehicle industry.

“Thanks to our broad technological positioning and global market presence, we can o􀀀er our customers the key solutions they need to transform their product portfolio from a single source,” said Wilhelm Rehm, member of the ZF Board of Management with responsibility for the new division.

He further said leveraging its regional structure, the company o􀀀ers signi􀀁cant advantages and close customer proximity for truck, bus and trailer manufacturers as well as 􀀂eet operators, wherever they are in the world.

Rehm added that in line with the company’s next-generation mobility strategy, CVS will accelerate ZF’s global growth.

“As CVS India, our vision is to help shape the future of commercial transport systems in India.

“By leveraging synergies with the ZF group, we are uniquely positioned to o􀀀er the next generation of solutions and services for commercial vehicles and 􀀂eets in India and the world over,” said P Kaniappan, head of CVS India.

He said that the company will support them to make them more e􀀀icient, safe, connected, intelligent and automated.

“Under the umbrella of ZF’s Vision for Next-Generation Mobility, we will leverage our capability to innovate, integrate and advance CV vehicle controls systems and set the pace to address the challenges of the commercial transportation industry in India, thereby creating sustainable value for our customers, employees and stakeholders,” he added.

ZF said its commercial vehicle solutions division is supported by around 25,000 employees based across 61 locations in 28 countries.

Ashok Leyland’s electric vehicle unit Switch sets up manufacturing site in Spain

Source: Economic Times, 15 January 2022

Ashok Leyland’s electric vehicle arm Switch Mobility will be setting up a new manufacturing and technology centre in Castilla y León, Spain, and invest about €100 million in the region over the next decade, the company said Wednesday.

The hub will have two production manufacturing electric buses and vans and is expected to see the first buses produced in the fourth quarter of 2022, as per a press statement. The manufacturing site will also have the capacity to serve markets outside of Europe including South America.

With a strong automotive supply chain within the region, excellent transport links and a high level of skilled automotive engineers and operatives, Switch has identified Castilla y León as the ideal location for their facility, the press statement further read.

“Supporting our well-established sites in the UK and India, our Spanish facility will provide us with crucial access to the European market,” said Andy Palmer, Executive Vice Chairman and CEO of Switch Mobility.
In a recent interview to ET, Palmer said that the company is looking to invest $150-200 million in the coming three to five years and is raising funds for the same.

Mercedes Benz India sales grew 43% in 2021 to over 11,000 units despite semiconductor shortage

Source: Economic Times, 12 January 2022

Mercedes Benz India reported a 43% growth in sales in 2021 as demand recovered after a particularly bad year in sales in 2020 due to the pandemic. Sales could’ve been higher if not for the semiconductor shortage, the company said.

The German carmaker sold 11,242 cars in India last year compared to 7,893 units sold a year prior. Sales, however, are significantly lower than the peak sales of 15,538 cars sold in 2018. With this, the Stuttgart-based company firmly remains the largest-selling luxury car maker in India for the seventh consecutive year.

The company is sitting on an estimated order book worth Rs 1,500 crore as more than 3,000 customers are waiting for their new Mercedes. A global shortage of semiconductors meant that automakers across the board are struggling to make enough cars to meet the demand in the market.

Last week, German rivals BMW and Audi reported 34% and 101% growth in their India sales in 2021. The former sold 8,876 cars in the country, including 640 units under its Mini brand. Audi doubled its sales to 3,293 units in 2021 after a particularly bad year in sales in 2020.

In a year of sport utility vehicles (SUVs), where more customers across price points preferred the high-seating body style, Mercedes Benz reported the long wheelbase E-Class limousine to be its best-selling car. To build on the success of the limousine, the company will be bringing the S-Class Maybach as well as the electric EQS to India in 2022.

“2022 will be another milestone year as we aim to lead the luxury EV segment by expanding our EV portfolio with the debut of the first-ever all-electric luxury sedan from Mercedes-Benz, the EQS,” Martin Schwenk, Managing Director & CEO, Mercedes-Benz India said in a press statement.

In an interview to ET on Wednesday, Schwenk said that he was confident to better the sales performance of 2021 this year with 10 new product launches, the situation remained uncertain due to the parts shortage and the fear of a resurgent Covid-19 pandemic.

The supply chain challenges will continue to prevail for at least the next six months, he said, adding that if not for these challenges, the market demand was good to deliver pre-Covid level of sales.

HOP Electric Mobility to invest Rs 100 crore to expand EV manufacturing capacity

Source: Economic Times, 05 January 2022

HOP Electric Mobility, a diversified business venture of Rays Power Infra, is looking at investing Rs 100 crore over the next two years to expand manufacturing capacity for electric vehicles.

The company currently has a manufacturing unit at Jaipur in Rajasthan with a production capacity of 50,000 vehicles per annum, which can be expanded to roll out 100,000 units every year. HOP Electric plans to set up a second manufacturing facility, which will take the total capacity to 500,000 units per year by 2023. The company is looking at raising resources to fund its expansion plans.

“We are targeting the commuter segment with our products,” said Ketan Mehta, founder and chief executive officer, HOP Electric Mobility. “Currently, most electric two-wheelers are priced upwards of Rs 1 lakh. We are looking at garnering volumes in the mass market by offering affordable scooters and motorcycles, with longer range and higher speeds.”

HOP Electric offers two electric scooters—HOP LEO and HOP LYF—in the local market. The products deliver a range of 70-120 km and retail between Rs 72,000 and Rs 95,000, depending on the state of sale. A third product, an electric motorcycle OXO, is scheduled for launch next month.

To shore up volumes, the company is looking at launching 10 new products over the next three years.

HOP Electric, which commenced sales earlier this financial year, is registering sales of around 1,000 units every month. Mehta expects monthly volumes to go up to 4,000 units by March/April 2022. The company is looking at selling at least 50,000 units in CY2022.

To increase reach, HOP Electric plans to have in place 100 dealerships by the end of the current financial year. Overall, the plan is to expand footprint across India in the next 2-3 years. The company has around 50 sales outlets spread across nine states, mostly in the southern part of the country.

“The potential for electrification in the two-wheeler and three-wheeler segments is huge. If current policies continue, all two-wheelers sold in the local market are likely to go electric by 2030,” said Mehta.

HOP Electric also plans to put in place a battery swapping and charging network across the country by the end of 2023. Its pilot network with five swapping stations and 50 batteries has already started operation in Jaipur, and the brand is now planning to further expand in other cities and states.

Ducati to drive in 11 models in India this year

Source: Economic Times, 03 January 2022

Italian superbike maker Ducati on Monday said it will introduce 11 new motorcycles in the Indian market this year. New launches would include all new models like the Scrambler 800 Urban Motard, Streetfighter V2, Multistrada V2, Multistrada V4 Pikes Peak, Streetfighter V4 SP, MY22 Panigale V4 and the X.

“We promised to launch 15 new models at the start of 2021, and despite the tumultuous year for the auto sector, we managed to keep that promise, and now the BSVI range for Ducati is complete in India,” Ducati India Managing Director Bipul Chandra said in a statement.

Globally, the third quarter of 2021, turned out to be the best in Ducati’s history, with a growth of 3 per cent over the same period of 2020, and 25 per cent as compared to 2019, he added.

“It is commendable how Ducati has stood strong through thick and thin, especially in the last 2 years, and thanks to that, we are ready with yet another year of back-to-back launches,” Chandra said.

The first quarter of 2022 will commence with the launch of the Scrambler 1100 Tribute Pro, followed by the Panigale V2 Bayliss Edition, livery of which is inspired by the 996R, the company said.

Post that, the Multistrada V2 will make its way to India, redeveloped with key focus on ergonomics, weight reduction, and engine updates, followed by the all-new Scrambler 800 Urban Motard, it added.

The second quarter would see the introduction of the all-new Streetfighter V4 SP, the new trim of Panigale V4 and the all-new Streetfighter V2, Ducati said.

Topping these up will be the Multistrada V4 Pikes Peak, the fastest Multistrada ever, and the XDiavel Poltrona Frau, made in collaboration with the luxury Italian furniture brand, it stated.

The later part of 2022, would see the launch of a new version of Panigale V4SP and the all-new Ducati DesertX, the first Ducati motorcycle in modern history to feature a 21-inch front wheel, the company noted.

EV maker Ampere inaugurates its first experience centre in Tamil Nadu

Source: Economic Times, 03 January 2022

Greaves Cotton’s e-two-wheeler arm Ampere on Monday inaugurated its first and one-of-a-kind experience centre at Ranipet, Tamil Nadu. Located at the newly launched mega EV facility in Ranipet, the facility is designed with digital interventions that can enable the customer to experience Ampere’s electric vehicles, the company said in a release.

Stating that Ampere is investing significantly in people, technology and infrastructure, the company said it is moving ahead with an aim to provide a phygital experience wherein discerning buyers can check out the latest products, understand the world of EV and Ampere, interact with EV experts, engage through digital interfaces for simple and easy understanding of EV technology.

Nagesh A Basavanhalli, MD and Group CEO, said, “With our EV megasite in Ranipet and the newly opened Experience Centre, we hereby strengthen our resolve to provide clean mobility for All. We are also committed to elevate overall customers experience with best-in-class products and other ecosystem support requirements.”

Future of Metro Rail in India

Source: http://www.metrorailnews.in, 29 December 2021

Metro rails are the most desirable infrastructures for the cities in India. They are known for facilitating people’s safe, quick, and easy movement. The transit system helps connect the hard-to-reach places with the rest of the city, which dissipates congestion as people reduce the usage of their vehicles. Moreover, with the inception of metro rail, the quality of life of people has also improved by providing more economic activities to the less influential segment of society. In this era of population explosion, the incoming of metro rail has proved to be a boon for society. With the pace with which Indian cities are getting populous, the Mass Rapid Transit Systems are the need of the hour.

The National Metro Rail Policy of 2017 has also advised the cities with a population of 20 lakhs or more to look for Mass rapid Transit Systems. Metro Rail is just one type of the MRTS, others being the:

Busways and bus rapid transit systems.
Light Rail Transit
Tramways
Regional Rail
India is investing heavily in the country’s transport infrastructure, imitating the Western Transportation System. The prospects of the metro rail are pretty bright in India. Cities are witnessing fast growth in the economic domain, and the clear manifestation is the increased number of personal vehicles. The negative side of the coin is that it has resulted in severe congestion and an increase in the pollution level of a country. The remedying efforts are required in the public transportation system, and the most pressing need is the implementation of the MRTS.

Metro rail has seen substantial growth in India in recent years, and the rate of growth is going to become twice or thrice in the coming years. The cities are facing the need for metro rail to meet daily mobility requirements. The metro rail encourages the walkable developmental pattern, which is also beneficial for society. The other merit of Metro rail is that it reduces cost and travelling time, which lowers the cost of production of goods and services, which significantly improves the city’s competitiveness. The pollution level has also reduced with the maximum public transport usage, bringing down chronic diseases and resulting in public health benefits.

Planning and implementation of Metro rail Projects: State government is the sole authority responsible for the Urban Development as the matter comes under the state list. That’s why it becomes necessary for the State Governments to make their regions more advanced and developed without hurting the economic sentiments of the people. Urban transport is inseparable and intricately connected with the issues of Urban development. Therefore, it has been argued that a System approach should be followed while implementing Metro rail transport infrastructure.

System Approach: In this, a city is represented by Land Use Zones, which are superimposed with a matching transport network. While treating the Urban area as a system and the followed interaction among the traffic, transport, and land use help predict future requirements and then evaluate the other alternative modes for the most optimum mobility plan for the city. Metro Rails should be planned and executed, keeping in mind their longer future perspective. They are a high-capacity transport system, suitable for the growing cities having a future increase in population over several years.

Alternative Analysis: Urban transports, including metro rail, deliver public goods. Therefore, its appraisal must entail a social and economic cost-benefit analysis. Metro rail enhances mobility, which catalyzes economic development and improves a city’s livability. That’s why it is pretty essential to assess the economic and social viability of the proposed project. The internal economic rate of return for the approval of any metro rail project should be either 14% or above. Moreover, the State Governments must operationalize UMTA in the city within a year for all those metro rail projects taken with the help of Central Assistance. The State Governments are responsible for supporting the metro rail projects to ensure financial sustainability.

Kanpur Metro Station
Moreover, Metro rails have become a status symbol for any state to prove its development. With the coming of the Metro, women can reach jobs situated at a greater distance as the Metro provides a safer and quicker mode of travel between the home and workplace. This mode of transport provides safety to women and other vulnerable sections of society, including the physically disabled and elders. There is also a coach reserved for the female commuters and seats for the PWD. The metros also motivate the passengers to use public transport more and more by creating residential, leisure, and commercial spaces in the metro stations. As a result, the commutation becomes much more accessible, and the project’s financial viability also improves.

Metros are essential in India to provide the last mile connectivity, which the feeder buses have failed to provide. The most considerable lacunae of the metro companies are that they are bothered mainly with the transportation of the passenger from one platform to another, but how they reach that platform has never been their concern. This problem got resolved by the Transit-Oriented Development (TOD), which introduced the idea of a Public-Private partnership. It also looked to develop the Metro in a very comprehensive manner and not in isolation. Still, some cities witness extreme ridership in buses because they don’t have any alternative public transportation system. Forex, the ridership in Indore Bus Rapid Transit System is around 6000 passengers per km.

Metro rails are needed because of the following reasons:
The most efficient transportation system is space occupancy, energy consumption, and numbers transported.
They are very high-capacity carriers, transporting many people during peak hours.
Unlike buses and other modes of public transportation, metro rails are eco-friendly, cause much less sound pollution, and have no air pollution.
They possess greater traffic capacity. It carries as much traffic as seven lanes of bus traffic and 24 lanes of car traffic.
It reduces the journey time from 50% to 75%.
The usage of metros should be promoted more and more as it helps in reducing the levels of greenhouse gases.
The number of road accidents has also gone down drastically as the people have chosen the Metro. Speeding usually happens when people are late for their work.
Metro provides air-conditioned travelling with the best comfort at relatively cheap rates.
Social Impact of the Metro Rail: All members of the society, irrespective of their caste, religion, financial status, can travel, which enhances the social integrity of the country. The necessity of a driving license is also eliminated to a great extent. It has come as a blessing in disguise for those who cannot drive or ride.

The economic impact of the Metro Rail: Mass Transit Development improves the usefulness and efficiency of the Public Transit system, which results in increased business for commercial developments and helps improve the country’s economy. Public Transit systems offer considerable savings in materials, labour, energy over other private transit systems. In addition, they have very efficient engines to carry large capacities, which helps in saving fuels.

Environmental impacts: Mass transit is more eco-friendly than other public transports. Private vehicles emit twice as much carbon monoxide and other greenhouse gases as Public Transport. With the coming of public transport, the number of cars on the road reduced, reducing the level of pollution in the city.

Future Challenges for Metro Rail in India
In India, metro rail defines the city’s development and growth, but still, there are specific challenges that the city and its residents need to overcome to ensure a holistic benefit. First, the skyline and the city’s urban form get distorted due to the widespread network of concrete viaducts. This can be addressed by taking the Metro to the underground. Secondly, the issue of land acquisition troubles the low and middle groups and disrupts their livelihoods. Finally, the construction phase disturbs the peace and tranquillity of the residents. Again, taking metros to the underground is the solution to the problem as it will minimize the need for land acquisition and reduce the people’s inconvenience during construction.

Moreover, the financial viability of any metro rail project depends on the accuracy of the traffic demand forecasts and the ridership estimation. These projects also guide the socio-economic and environmental appraisal against the project’s cost estimation. Unfortunately, most of these forecasts often led to inaccurate or misleading pictures about the project.

Thirty-four metro rail projects are under implementation across the country, with a cumulative length of nearly 1230 km. In addition, the ministry has received proposals for another 16 projects with a cumulative length of 638km comprising Delhi, Haryana, Uttar Pradesh, Kerala, Maharashtra, Rajasthan, Tamil Nadu, etc. Expansion and development are the need of the hour, which no State Government can afford to neglect. Some examples of the recently completed metro projects are as follows:

Important figures
Operational Routes: 707.61 km
Under Construction Routes: 505.25 km
Approved Routes: 471.54 km
Proposed Routes: 1045 km
Interesting Facts about Metro Rail Project:-
Oldest (First) Metro Rail System: Kolkata Metro
Newest Metro Rail System: Nagpur Metro
Largest Metro System: Delhi Metro (347 km)
Smallest Metro System: Ahmedabad Metro (6 km)
Busiest (Highest Ridership) Metro System: Delhi Metro
As the Metro enhances the values of the property and boosts up the economic activities, it consequently enhances the government’s revenue at various levels. According to the Tax Increment Financing Model, this growth in the revenue should be utilized in the funding of the metro projects. With the help of this model, the collected funds can be used effectively for infrastructure projects without necessarily raising the tax rates. This would strengthen the local economy by providing additional revenues by way of development charges.

Smallest Metro System: Ahmedabad Metro (6 km)

Busiest (Highest Ridership) Metro System: Delhi Metro

Lucknow Metro is the most expensive metro rail project in Uttar Pradesh. Its first phase got operational in the year 2017.
Kochi Metro: It also got completed recently. Kochi is the fastest developing city in Kerala and has an international airport, harbour, and now the Metro.
Hyderabad Metro: It got operationalized in July 2017. Trail runs have started on the Miyapur to SR Nagar stretch.
Some proposed and upcoming metro projects are Pune, Patna, Bhopal, Indore, Meerut, Guwahati, Chandigarh, Vijayawada, etc.
 
As the Metro enhances the values of the property and boosts up the economic activities, it consequently enhances the government’s revenue at various levels. According to the Tax Increment Financing Model, this growth in the revenue should be utilized in the funding of the metro projects. With the help of this model, the collected funds can be used effectively for infrastructure projects without necessarily raising the tax rates. This would strengthen the local economy by providing additional revenues by way of development charges.

Bajaj Auto to set up Rs 300 crore EV manufacturing facility in Pune

Source: Economic Times, 29 December 2021

Bajaj Auto Ltd on Wednesday said it will set up an electric vehicle manufacturing facility at Akurdi in Pune with an investment of Rs 300 crore. The facility, for which the work has already commenced, will have the capacity to produce 5,00,000 Electric Vehicles (EVs) per annum and cater to both domestic and exports markets, the company said in a release.

The first vehicle from the new unit, spread over half-a-million square feet space, is expected to be rolled out by June 2022. The unit will employ around 800 personnel.

Akurdi is the site of the original Chetak scooter factory.

“In 2001, Bajaj 2.0 took off on the roaring Pulsar, in 2021, Bajaj 3.0 arrived on the charming Chetak. Going forward, for the Bajaj portfolio, except for implementing one state-of-the-art ICE (Internal Combustion Engine) platform that is currently under development, all our R&D drive train resources are now laser focused on creating EV solutions for the future.

“This alignment reflects our belief that light electric vehicles for sustainable urban mobility is an idea whose time may finally have come,” Rajiv Bajaj, Managing Director of Bajaj Auto, said.

He also said the investment at the Akurdi facility will complete the virtuous cycle of hi-tech R&D competencies, high-efficiency engineering capabilities, world class supply chain synergies, and global distribution network which should leapfrog the company into a market leading position in EVs in India and overseas.

The investments made by Bajaj Auto will be supplemented by a number of vendors, who will invest a further Rs 250 crore (USD 33 million), the company said.

The new unit will have cutting-edge robotic and automated manufacturing systems for everything, including logistics and material handling, fabrication and painting, assembly and quality assurance.

These systems have been designed for flexible product mix while keeping in mind the best worker ergonomics and maximum process efficiency, it said.

The unit at Akurdi is co-located with Bajaj Auto’s state-of-the-art R&D centre to foster greater collaboration, leading to faster time-to-market and should transform the facility into a hub for design, development and manufacturing of a complete range of electric vehicles, according to the statement.

How deep-tier financing can help India’s manufacturing sector

Source: Economic Times, 16 December 2021

The pandemic has disrupted India’s growing auto sector. The industry, which was flourishing in the early 2010s, recording a growth of over 10 per cent, is now struggling. In FY21, sales of all segments (two wheelers, three wheelers, commercial vehicles and passenger vehicles) were at a multi-year low. In FY11, 6,76,000 commercial vehicles were sold and in FY21 only 5,69,000. This sharp downturn is a huge setback to the millions of SMEs, who have been a crucial part of the auto value chain and are now grappling to stay afloat.

Take for instance, Ford’s recent exit from India. The company had more than $272 million in dealership investments. Its decision has put at risk over 4,000 vendors, some of whom claim that business with Ford made up 20 to 40% of their business. Simply put, this means losses worth crores, in terms of finances, raw materials and human capital.

Ford is just one example. In the last two years, the auto component industry declined over 30% and capacity utilization remained at roughly 60%. If we look at exports in FY21, India’s share in the global trade in auto components is a dismal 1.3% of the $1.3 trillion. Undoubtedly, several vendors of large Original Equipment Manufacturers (OEMs) have suffered setbacks due to COVID-19. Now, with everything slowly returning to normal, the auto industry will continue to face two challenges:

     Slow recovery for demand
     Increased supply side constraints, particularly with financing

According to Automotive Component Manufacturers Association of India (ACMA), MSMEs constitute 80% of India’s component industry, and a majority of these are tier 2 and tier 3 players. For long they have been challenged with access to timely capital, manpower and technology. Now, these issues become all the more pertinent because vehicle production is still at an all-time low, and MSMEs continue to struggle with liquidity.

Adding to their woes are challenges faced by NBFCs and banks. NBFCs who have traditionally been major lenders to the auto industry are embroiled in the ongoing liquidity crisis post the bankruptcy of Infrastructure Leasing and Financial Services impacting lending outcomes. Banks prefer to focus on financing large tier 1 vendors, due to NPA fears. This leaves out a massive chunk of MSMEs, almost 80% in the country. Not only does this lead to increased risks in supply chain distribution, but poses risks of MSMEs shutting down.

While the situation is perhaps most stark in the auto industry, most manufacturing sectors have a similar tale to tell. Between the pandemic, existing and exacerbated systemic liquidity issues, cyclical lows and the global supply chain crisis, manufacturing SMEs countrywide are struggling. While some sectors such as pharma may have come through a little better, they too are facing challenges with the global supply chain crisis.

Understanding deep-tier financing
There’s an urgent need for capital to reach tier 2 and tier 3 vendors at timely and affordable rates. A way to achieve this is through deep tier discounting, that will ensure acceleration of capital from OEMs to tier 1 and tier 2 as well, all through a seamless automated model.

Deep-tier discounting is an effective concept. It goes beyond traditional vendor financing that focuses on large OEMs and tier 1 vendors in isolation, but instead, unlocks access to working capital for the entire supply chain of a company, allowing the buyer to deploy working capital to SMEs all the way down the value chain. This transparency also encourages financial institutions to provide working capital solutions at competitive and affordable pricing, making it easier to offer financing to the entire supply chain, even the smallest vendors/SMEs.

Enabling deep-tier financing requires all stakeholders – corporates, tier 1, 2 and 3 vendors to be on a unified platform where there’s complete transparency across levels, and information and capital flow can take place in a seamless manner. Technology plays a key role here. Once established, there will be several benefits. Buyers have clear visibility of where the liquidity gaps are and in due course, be able to pre-emptively plug those gaps to avoid any unnecessary disruption.

Finally, deep tier financing doesn’t just benefit the vendors i.e. MSMEs but large corporates as well. It allows them to optimize working capital in a similar fashion to that of vendor finance. Hence, the impact is deeper, considering all suppliers across the chain are enrolled in the program. This, in turn, allows corporates to build more resilient and sustainable supply chains, which becomes important in today’s scenario.

In a nutshell, considering all suppliers have access to finance, corporates are in a better position to mitigate risks, enabling greater profits and growth that benefit all.