The Automotive sector deems for almost 3-7% of the world economy. The unfortunate circumstances have led to a tremendous blow to the national as well as the global economy. Due to the complete lockdown in most of the nations, the supply chain is primarily affected. The import and export amenities have stopped their operation. The government rolled out strict laws and regulations to prevent the spread of coronavirus, ensuring no production and manufacturing in the industries. Hence, the Automotive companies are left with zero production so far. Thus, there is no growth and sale in the Automobile sector since lockdown is imposed.
Covid19 Impact on India’s Automobile Sector
The Automobile Sector of India accounts for 7.1% of the Gross Domestic Product (GDP)of the country. Also, it contributes around 22% to the manufacturing GDP. Apart from loss in the Automobile market, there is also degradation in the national economy. The most crucial thing to note is that India imports approximately 27% of its automotive parts from China. Since the coronavirus had spread from Wuhan, China, India had reduced the imports from China. In India, the nation is under complete lockdown since 24th March 2020. All the minor and major industries have stopped their production and other services.
The month of April was like a deadly dream for the Automobile market. The sector confirmed zero sales in April. Since the companies are not recording any sales and profits, they have decided to take some steps to compensate for the expenses. Most of the companies decided to reduce the employee’s salary or even vacant some of the positions. According to the latest Deloitte report, the Research and Development (R&D) operations have slowed down and reduced non-profitable services.
The BS4 and BS6 emission transition is also on a halt due to the spread of the untimely COVID19. As per the earlier reports, the government was supposed to stop the sale of BS4 vehicles in April. But due to the commencement of the lockdown period, the sellers were unable to clear their BS4 stocks. Therefore, the Federation of Automobile Dealers Association (FADA) requested the Supreme court to allow the sale of BS4 vehicles post lockdown. From the Original Equipment Manufacturers to the Automobile dealers, the whole chain is affected due to the COVID19 pandemic.
Covid19 Impact on Global Automotive Industry
China is the hub of the global Automobile Industry. The nation accounts for almost 7% of the worldwide GDP. Many countries, including India, depend upon China for the export of automotive parts. But since the government of the nations imposed the complete lockdown to prevent the spread of coronavirus, China’s export facility is temporarily discontinued. Also, many countries are avoiding imports from China and neighboring countries.
The American EV manufacturer, Tesla, is also facing the worst time ever in the industry. For the past couple of months, it suspended the production in its facilities. The company decided to temporarily stop the manufacturing of the Tesla electric vehicles and take other preventive measures to keep their employees safe during the coronavirus pandemic. To reduce the expenses, Tesla decided to cut the wages of its employees or grant them unpaid leaves. However, it believes that Tesla is capable of bouncing back in the market post COVID19.
So, whether it is the Indian Automobile sector or the global Auto Industry, it is largely affected due to coronavirus. The supply chain is temporarily affected and will take time to come back on the track. If the situation comes under control within a couple of months, the India Automobile industry might return to its original pace and growth in approximately 12-18 months. Also, for the Indian market, the BS4 to BS6 transition will come into action as soon as the lockdown ends. Therefore, the dealers will decrease the BS4 vehicle prices drastically to empty their stocks.
On the other hand, in the International markets, the scene is almost the same. The economy of many countries has been affected due to the negative impact of coronavirus on the Automobile industry. Whereas big companies like Tesla earlier reported that it has enough stocks to sell for almost a couple weeks after the lockdown is over. Different companies have different plans after the coronavirus has ceased, but the national, as well as the global economy, will take some time to get stabilized.