Auto sector to suffer loss of Rs 21k cr due to plant closures amidst COVID-19 lockdown

The suspension of production by automobile and auto component manufacturers as a move to overcome the spread of coronavirus in the country is likely to result in a loss of over Rs 21,000 crore in a short period.

The original equipment manufacturers (OEMs) and automotive component makers have announced closure of their manufacturing units in view of the coronavirus pandemic. The Society of Indian Automobile Manufacturers (SIAM) and Automotive Component Manufacturers Association of India (ACMA), on Monday, issued advisories to their respective members to consider plant shut down for a limited period to overcome the critical period so that workers are not exposed to the virus.

“This is in line with SIAM’s motto of building the nation, responsibly,” Rajan Wadhera, President, SIAM said in a statement.

Subsequently, majority of automobile manufacturers including Maruti Suzuki India, Tata Motors, Hyundai, Toyota Kirloskar Motor and Hero MotoCorp announced temporary shutdown of their manufacturing plants.

“As per quick estimates by SIAM, it is expected that Plant closure of Auto OEMs & Components will lead to loss of more than Rs 2,300 crore in turnover for each day of closure,” Wadhera said in another statement on Tuesday.

Already, the automobile industry has been passing through a tough time for the past year owing to general economic slowdown and switchover to BS-VI emission standards, which has resulted into huge drop in monthly sales. The industry will switch over to BS-VI emission standards from April 1, 2020.

The automobile industry produced a total 20.49 million vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycle between April 2019 and February 2020 as against 24.35 million vehicles in the corresponding period of previous year, recording a decline of 13.29% year on year.

Earlier, this month, SIAM had filed an application in the Supreme Court seeking directions for ensuring that sale and or registration of BS-IV vehicles are allowed till the cut-off date of March 31, 2020.

Some State Governments have recently issued circulars directing that no applications for Registration of BS-IV vehicles would be accepted on or after a certain date, which are much ahead of March 31, 2020, SIAM said.

The cut-off dates ranges from February 29, 2020 to March 25, 2020 from State to State, though BS-VI emission compliance is mandated from April 1, 2020.

These circulars have put the customers, dealers and vehicle manufacturers in severe discomfort, as each of them are racing against time to exhaust the BS-IV stocks which are with the dealers.

The Supreme Court has directed that no BS-IV vehicle will be sold or registered from April 1, 2020.