Car sales potter along in February, Covid-19 hit on supply chain could impact March numbers

by Ajit Dalvi & Mayank Dhingra 02 Mar 2020

With the BS VI emission norm mandate kicking in less than a month from now, OEMs, their dealers and the supply chain are actively engaged in the technological shift, rejigging production schedules and reducing/finishing BS IV stocks. That’s not all. The outbreak of Coronavirus (Covid-19) in China, which exports 26 percent of components to Indian automakers, has now started impacting production at some OEMs in India. Tata Motors, Mahindra & Mahindra and MG Motor India are among those who have confirmed Covid-19-related component supply chain issues.

Given the current situation where most of the factories in China are shut, it could be surmised that March 2020 could see a continued impact on production and in turn sales of Indian automakets, particularly in the PV and CV segments.   

Maruti Suzuki India, the passenger vehicle market leader, has announced sales of 133,702 units in the domestic market, e down 2.3% year on year (February 2019: 136,912). For the 11-month April 2019-February 2020 period, cumulative PV sales are 1,338,106 units, down a sizeable 15.6% (April 2018-February 2019: 1,584,795). Of the 11 months, sales have been in negative territory for eight months with the other three showing marginal or little growth. With one month left to go for closure of FY2020, the carmaker's total PV sales are 145,031 units short of matching FY2019's 1,584,795 units.

Hyundai Motor India registered domestic market sales of 40,010 units in February 2020, down 7.2% (February 2019: 43,110).

Tata Motors has reported despatches of 12,430 units in February 2020, a YoY decline of 36%. For the fiscal year to date, the carmaker has registered sales of 125,521 units, down 35% YoY (April 2018-February 2019: 192,333).

The fire on Febuary 18 at Varroc Lighting’s plant at Hinjewadi, Pune, a supplier to Tata Motors among other OEMs in India, has had an impact on production and wholesale volumes.  

Commenting on the numbers, Mayank Pareek, President, Passenger Vehicles Business Unit, Tata Motors said, ”The Altroz has received an overwhelming response. Our ‘New Forever’ product portfolio has built a strong order book since its launch end of January. However, the outbreak of Covid-19 in China and a recent fire incident at one of our strategic vendors affected the vehicle production and wholesale volume. Multiple actions are being taken to reduce the impact, staying close to our customers by providing transparency of the delivery situation. On a positive note, our BS IV vehicle stock is well below the targeted level, we are well placed for the BS IV to BS VI transition. With the strong customer interest in the New Forever portfolio and a step up in market activation, we are confident of improving our market competitiveness and volume growth in the coming months.”

Mahindra & Mahindra’s PV division reported sales of 10,938 vehicles in February 2020, compared to 26,109 vehicles in February 2019, down a substantial 58% YoY. Commenting on the performance, Veejay Ram Nakra, Chief of Sales and Marketing, Automotive Division, M&M said, “The ramp-down of BS IV vehicle production has been in line with our plan for February. However, because of the unforeseeable challenges on the parts supply from China, our BS VI ramp-up has been affected. This has resulted in a high de-growth in our billing volume for February and our dealer inventory is, now, under 10 days. Going into March, we anticipate the challenge on parts supply to continue for another few weeks, before we get back to normalcy.”

MG Motor India reported retail sale of 1,376 units in February 2020, its lowest since sales began in July 2019 and taking its total sales in FY2020 to 20,436. February 2020 sales include 158 units of the ZS EV, the carmaker’s latest India product. The ZS EV was launched at an introductory price of Rs 20.88 lakh (ex-showroom, New Delhi) and has already received 3,000 bookings till date. . Bookings for the Hector have crossed 50,000 units.

Commenting on the sales performance, Rakesh Sidana, Director – Sales, MG Motor India, said, “The MG ZS EV has received a stupendous response in its debut month, with over 150 units delivered to our customers already. Our customers are delighted with our holistic EV approach, which includes the installation of a home or office charger even before they receive their vehicle. We will continue to focus on furthering the cause of EVs month-on-month and delivering superlative customer delight to our customers.” he added.

“Meanwhile, the unforeseen coronavirus outbreak has severely affected our European and Chinese supply chains, disrupting our production and impacting our sales in February and will continue through March. We are working towards stabilising the situation and are hopeful that reasonable normalcy will be restored by the end of March,” he added.

How India Auto Inc is coping with the supply chain issue
Apex industry body SIAM is taking stock of the deteriorating situation. Rajesh Menon, director general, SIAM, said, "We are still consolidating data and analysing the situation. We will come back with a complete analysis when we announce sales data for February next week."

From the component industry’s perspective, a delay in the supply of catalytic converters, fuel injection equipment, along with after-treatment and exhaust products, a good portion of which are sourced from China, would in turn translate into delays at the OEMs’ end. It is understood that India Auto Inc has stock in hand for the next 2-3 weeks, after which industry would be hard-pressed to deliver. While resumption of production in China is learnt to have begun in a small way, the concern is that logistics and deliveries would take some more time. OEMs and suppliers are keeping their fingers firmly crossed that the Covid-19 impact does not amplify further.

According to Nikunj Sanghi, director- International Affairs, FADA, "The market is still very fluid. Our entire focus right now is to liquidate BS IV inventories and we are keeping an internal deadline of March 15 to be on the safe side. While the Coronavirus situation is a temporary breather for us because manufacturers would not push for wholesales, if the impact lasts long, it could engulf all businesses and kill the demand per se."