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Second wave of COVID-19: Probable impact on Automobile sector

After the 1st wave of COVID-19 last year, the Indian auto Industry strived hard and was in a recovery path. But this time, the damage is anticipated to be severe.

The first wave of COVID-19 was started in March 2020 with lot of panic and uncertainty and continued till Sept-Oct 2020. During this prolonged period, almost all economic sectors were seriously affected, many people were jobless and the economic condition of lower and middle class were shattered. Automobile sector was seriously affected because of lack of demand as well as production facility.

The situation started improving gradually and everything was back into track. People have joined their work place, supply chain was reestablished and economic cycle started rolling. Automobile sector including two wheelers also were back to recovery path and there was a relief to the industry. In last 4 to 5 months both passenger and commercial vehicle sales were on recovery path also.

But, the situation has worsened in last few weeks and the severity of COVID-19 in this 2nd wave is high. The exponential increase in cases created panic and some states have declared lock down and other states may adopt same path in future. This second wave will hamper the recovery momentum in this sector.

This will negatively impact the sector. Challenges will be in both demand as well as in production side. Economic slowdown will have an effect on income and spending of customers. Buyers anticipation over next 6 months to one year will be uncertain. Lock down and strict restriction will affect production and sales. There will be supply chain disruption. The input cost will be increased. Due to partial lock down in Maharastra and Southern States, critical automotive components will not be available. Show rooms have to shut their doors amid curfews and strict restrictions on movement of people.

An unprecedented surge in demand for electronics and personal computer amid pandemic has resulted in the shortage of semiconductors hitting vehicle sales. Supply of steel is anticipated to be affected for supply chain disruption. As per report from Tata motors, Jaguar Land Rover (JLR) will be suspending production at two of its plants from 26th April due to problem In global availabilities of semiconductors and disruption in supply chain. Several other automakers have decided to pause operation knowing that the road to recovery is harder this time. Recently Hero Moto Corp decided to pause operation at all it’s plants in the country due to declined demand and localized shut down in many Indian states.

Others have delayed or even cancelled their product plans. Skoda has put off the lunch of much awaited 2021 Octavia Sedan which was planned to go on for sale this month. Some companies like Tata Motors are now continuing production with limited scale. Toyota Kirloskar Motor has announced a pause in operation at its Karnatak plant.

After the 1st wave of COVID-19, the auto Industry in India strived hard and was in a recovery path. But this time, the damage is anticipated to be severe. The industry should look into ways to recover after the 2nd wave recedes. Government has also to ensure fast recovery of economic process in order to boost the demand. Special attention is needed for supply chain recovery and value addition.

 

 

 

About P.K Tripathy

Principal, BIITM

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