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Virtual Lockdown in world’s fourth-largest automobile market

Prime Minister Narendra Modi informed the state government of India to implement a complete lockdown as the last resort. Till now, in amid of the covid second wave, complete national or statewide lockdowns have not been imposed. However, the fourth largest automobile industry in India has its own story.

Well, a drastic and sustained rise in the number of cases across the country has caused localized lockdowns. This forced the automakers and dealers to temporarily shutting down their facilities.

Notably, not only the new orders failed but also the people even canceled the booking made before. States like the Uttar Pradesh and Madhya Pradesh dealers have also reported around a 40% to 60% fall in the sales when compared with the pre-covid data.

Hero Motocrop is one of the leading two-wheeler manufacturers who has announced a nationwide shutdown of its plants for four days that is between 22nd April and 1st May. However, the maker of the popular Splender bikes exclaimed that in spite of the 4-days lockdown and production halt, there won’t be any impact on the capability to meet the requirement, as per the company’s exchange filing.

The US-based car maker, General Motors has now fired around 1,149 employees from its Talegaon plant in Pune. The company’s director of communication, George Svigos mentioned in Economic Times that no vehicles were manufactured in the last four months.

It seems like déjà vu of the story which unfolded in the first half of 2020 at the time of the first wave of the COVID-19. Starting from the Maruti Suzuki to Hero MotoCrop, Indian companies are already facing the heat. The top ten automobile companies in India have found a decline in their share prices in the month of April and getting some of them registered a double-digit decline.

Moreover, the negative consumer sentiments and the possibility of another lockdown which has had an impact on auto ancillary makers. Further, some of them manage to weather the storm till now.

RC Chargava Chairman, Maruti Suzuki mentioned, “If the markets are shut, then demand will fall. Any prolonged shutdown will mean demand will go down. Production cannot continue if sales stop. You can’t run factories if dealerships are shut. It doesn’t make sense.”

However, the impact of the lockdowns and curfews has a spillover effect on the auto dealers. John K Paul who is the managing director of Popular Vehicles, which is one of Kerala’s largest Maruti Suzuki dealers, mentioned ET Auto.

However, the Slump in auto sales last year led to large-scale layoffs in the auto sector and its threat looms large again.

However, one can swiftly recover in car sales which is after the last year’s lockdown but every time the miracle may not repeat itself. Well, optimism is scarce and people have lesser savings which they did last year. Moreover, the pent-up demand might be missing this time.

By making the matter worse, both the two-wheeler and carmakers had to increase the process which is due to the shift of the BS-6 models as well as the rise in the raw material prices. Well, the increase in the price might be a deterrent for those who had fenced almost buying a new vehicle.

The bigger companies even have recovered later. But another slump in this industry might be fatal for several small businesses that highly depend on the bigger industry for their survival. Well, millions of people who have worked in this sector, directly or you can say indirectly are likely to save more than the expecting hard times ahead. However, the reduction of consumption is likely to take a further toll on the economy.

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