Business

A March of doom for the auto industry

Revenues took a severe hit, and OEMs struggled to balance finances, says SIAM’s Rajan Wadhera. V. V. Krishnan  

Total wholesale dispatches of vehicles slumped 45% to just over 10.5 lakh units in March 2020 as manufacturers halted production and sale in the last week amid the lockdown due to the outbreak of COVID-19.

The automobile industry had dispatched over 19.08 lakh units to dealers in March 2019, as per data released by the Society of Indian Automobile Manufacturers (SIAM). Production of vehicles across segments also fell by 33.6% to about 14.47 lakh units, compared with over 21.8 lakh units in March 2019.

“The month of March 2020 was one of the most challenging months for the auto sector as the 21-day lockdown [brought] the production and sales of vehicles to a standstill in the last week. As revenues took a severe hit, OEMs struggled to meet fixed cost and working capital requirements,” Rajan Wadhera, president, SIAM, said. Stating that before the lockdown the industry had already been reeling under severe degrowth and pressure of a disrupted supply chain, he said the auto industry was losing an estimated ₹2,300 crore in production turnover for each day of closure. Wholesales of passenger vehicles stood at over 1.43 lakh units last month, down 51% from over 2.91 lakh units, while production fell 38.14% to 2.07 lakh units from 3.34 lakh.

While domestic sales of cars fell 52.12% to 85,229 units, those of utility vehicles and vans declined 44.67% to 51,569 units, and 69.88% to 6,216 units, respectively. For commercial vehicles, domestic sales nosedived 88.05% to 13,027 units from over 1.09 lakh units, while production was down 82.88% to 18,057 units from over 1.05 lakh units in March 2019.

The sale of two-wheelers fell close to 40% to 8.66 lakh units versus 14.40 lakh units in the year-ago month. Production was down by 28.21% to 11.61 lakh units, down from 16.18 lakh units. While scooter sales fell 32% to 2.63 lakh units, sales of motorcycles was down 41.89% to 5.7 lakh units during the month under review.

“The auto industry is engaged in a dialogue with the government. There would be challenges on the supply side; demand side and also on the issue of availability of finance which would all need to be addressed to bring back growth in the sector,” Mr Wadhera added.

For the full year 2019-20, total domestic vehicle sales stood at over 2.15 crore units, down 18% from more than 2.62 crore units dispatched in March 2019. Passenger vehicle sales last year fell 17.82% to over 27.75 lakh units, while those of commercial vehicles was down 28.75% to 7.17 lakh units. Two-wheeler sales were lower by 17.7% to 1.7 crore units.

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Printable version | Nov 25, 2020 6:14:49 AM | https://www.thehindu.com/business/a-march-of-doom-for-the-auto-industry/article31334716.ece

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