India Auto Inc faces the acid test with Covid on the rampage 

As Covid-19 infections continue to spiral at an alarming rate across the country, there is growing concern among automakers on what lies ahead especially when the peak curve is due only sometime in the middle of May.

“Daily infection numbers have already crossed 200,000 and the way it is going, 300,000 may happen over the next week to 10 days,” says a top industry executive. When this happens, his fear is that there is no telling what the paranoia could lead to in terms of mass worker migration back to their hometowns or smaller suppliers going belly-up.

The good news thus far is that industry is in a better position to cope with the crisis coupled with the fact that states like Maharashtra have been quite pragmatic in their lockdown guidelines. After last year’s harsh lockdown when the country came to a grinding halt, this time around there is a realisation that livelihoods matter and the show must go on.

“Auto companies are well aware of standard operating procedures in their plants,” says an ancillary supplier CEO. As he puts it, manufacturing facilities are far safer today since all the protocols are in place. Lessons have been learnt in terms of wearing masks, maintaining social distancing and ensuring that the work spot is constantly sanitised. 

Challenging times for suppliers, auto dealers
Quite unlike 2020 when the Centre ensured mass closure across the country, this time around States are drafting guidelines while entrusting manufacturers with the responsibility of following them diligently. The challenge now is for suppliers, especially the smaller ones, to keep the show going because they will be up against falling orders as well as the prospects of contract workers rushing back from the big cities back to (what they perceive as) the safety net in their towns and villages.

With lockdowns now becoming the norms, dealerships are not going to have hordes of people crowding around bikes and cars as was the case till recently. Now it is only essential services that will be in place with more and more people being urged to work from home. To that extent, factory despatches will start reducing and the chain reaction will pass on through the supply chain to vendors. In this backdrop, keeping the entire ecosystem intact while the order book is falling will be a challenge for smaller enterprises.

The show must go on
And even while States know that the show will need to go on, especially after last year’s nightmare, the key is to ensure that life is made easier for manufacturers. “Bureaucratic glitches on interpretation of rules should not end up making things sticky as was seen last year. Hopefully, this will not be repeated this time around and make life difficult for us,” says a company official. 

Automakers also believe that workers are more than aware that there are no jobs back home and it makes more sense to ensure that the money keeps coming in during these difficult times. “When many of them headed back last year, they found out that there were no employment opportunities in their hometowns,” adds the official.

Despite this, the big unknown remains in what lies ahead in terms of the infection tally spinning out of control and causing a sense of panic all around. It is this fear that could lead to a worker exodus which is understandable especially when horror stories start doing the rounds. 

Nobody in their wildest dreams would have thought that a country which seemingly had everything in control till February now has its back to the wall. Infections have been growing at almost 10 percent daily and the fear is that the worst is yet to come especially from states like West Bengal where polling is still underway. Throw in other overcrowded events like the Kumbh Mela and it is evident that “the country is sitting on a box of dynamite” as a CEO describes the situation.

There is no question that the first quarter numbers are going to fall especially when more and more States are imposing lockdowns and manufacturing output will naturally be affected as a result. Sure, it may not be as dire as last year when April reported zilch volumes but that is hardly of any comfort especially when sales were seemingly picking up all over again.

States know only too well that they cannot afford to be in the situation they were in 2020 when key revenue streams like liquor and auto fuel sales came crashing down. Many of them continue to be financially fragile and those who dished out fabulous fiscal sops during the assembly elections will possibly feel the pinch more. 

States also know that manufacturing is a key driver of GDP and this explains why they are dealing with the crisis in a far more mature way. “Governments are more experienced now and know that a knee-jerk reaction will not help anybody’s cause,” says an auto industry executive. 

The good news is that the vaccine drive is now generating momentum and, hopefully, new entrants like Sputnik will help access a larger part of the population especially the young who are also falling ill. In the interim, the only hope is that the numbers miraculously start to come down though that seems farfetched at this point in time. 

“If India can get through May, the worst will hopefully be behind us,” adds the executive. Whether that hope is based on scientific reasoning or just wishful thinking is a million-dollar question. 

Also read: Autocar Professional's latest issue is about the lockdown and the impact on the industry