Nirmal Minda believes the fluctuations in auto volumes are going to be very high over the next two months — “not by a single OEM but by everyone”. According to the chairman and managing director of the UNO Minda Group, none of the manufacturers is “giving us firm forecasts” for June or July.
“Of course, they had given us the original budgeting forecasts for Q1 in February which were very promising. Everybody is now saying that they would be working with a month or even 15 days of advance notice — on the basis of which we need to plan our inventory and manage production,” he told Autocar Professional recently.
For now, some automakers are gradually resuming operations with infections falling in some key states over the last week. Maruti Suzuki has begun production at Gurgaon after a two-week maintenance shutdown while Hero MotoCorp has, likewise, opened the factory gates at its units in Gurgaon, Dharuhera and Haridwar.
“I believe OEMs have their own limitations too and while they do give us a realistic indication of production, at this moment, we are not out of the pandemic yet,” said Minda. After all, the country is still weighed down by the second wave and it is only when the entire ecosystem gets into a streamlined mode of operation will things become better.
A wait-and-watch situation
“It is still a wait-and-watch situation,” he cautioned since there is no telling which way the wind will blow given the unpredictable nature of the second wave. Business is weathering a “deep storm” which began with low demand and is now being aggravated by the second wave of the pandemic.
This has led to closure of factories and showrooms across states. However, the silver lining is that the stock level in the supply chain is almost dry and “so whenever we resume full operations, we are expecting a huge jump in volumes in the short term”.
The company, which supplies switches, lights and alloy wheels to a slew of OEMs, is now leveraging the shutdown time at its customers’ end to scale up inventory. “We have been calling our manpower over the last month to build inventories as per the needs of our customers during this period,” said Minda.
On the supply side, there are cost challenges, particularly with commodity prices going up significantly over the last few quarters. Additionally, raw material availability constraints are “pushing us to maintain a higher inventory of the finished goods, thereby driving up costs indirectly”.
According to Minda, the company has been relying on best practices in daily work management which include tracking permissible purchase limits, assessing the level of stock and labour attendance along with other checks and balances at an all-India level. This is to ensure that it does not default on customer orders and is well prepared for any unprecedented demand in future.
The lockdown this time has been quite different from last year since companies now have first-hand experience of dealing with the situation. Moreover, the migrant labour exodus has not been as pronounced either since employers have gone the extra mile in taking care of contractual operators and fitters.