Lockdown-hit India Auto Inc stares at Rs 126,500 crore loss, urges Centre for restart in safe mode

The beleagured Indian automotive industry, which recorded an 18% year-on-year decline in FY2020 and zero sales in the domestic market in the first month of FY2021, has urged the government to give a green signal to the sector to restart manufacturing operations.  

The domestic automotive industry, which is estimated to have been losing over Rs 2,300 crore turnover a day since the lockdown began on March 24, is staring at accumulated losses of Rs 126,500 crore over a 55-day period, considering the countrywide lockdown has now been extended till May 17. 

As companies gear up to restart operations, apex industry bodies, SIAM, ACMA and FADA have jointly written to the goverment to "permit the entire automotive value chain to re-commence operations in unison".

In the letter, the Society of Indian Automobile Manufacturers (SIAM), Automotive Component Manufacturers Association of India (ACMA) and the Federation of Automobile Dealers Associations of India (FADA) have pointed out how if any segment does not commence operations, the entiure value chain will not be able to restart.

The letter says that the automotive industry in India is a key driver of the economy, amounting to around $120 billion (Rs 888,120 crore) in turnover that contributes 7% to India’s GDP, 49% to the manufacturing output and generates employment for over 3.7 crore people, directly and indirectly. The sector also exports $27 billion (Rs 199,827 crore) worth of vehicles and components annually.

Speaking in one voice, the three industry asociations say that it is in this context, they have made a joint submission to allow the sector to resume operations. ‘You would appreciate that the automotive value chain is highly complex, integrated and interdependent. A vehicle manufacturer cannot commence operations if any one of its suppliers is unable to undertake production. Further, production for a vehicle manufacturer would only amount to adding to inventory and thus blocking working capital in case dealers are unable to sell vehicles.’

SIAM, ACMA and FADA have pointed out that the entire industry has created detailed safety SOPs and these, together with social distancing norms as prescribed by the government, will be adhered to the utmost sincerity, for any concerns regarding the spread of Covid-19.

The letter further urges that considering the fragile health of the automotive industry and its economic contribution, it be given permission for the whole value chain to open up and recommence operations. This includes vehicle manufacturers (OEMs), component suppliers, dealerships, service workshops and the Regional Transport Authorities. The letter highlights that, "In fact, auto dealerships/workshops will not be able to open till such time the citizens are not allowed to come out of their homes freely’."

The automotive industry hopes that it is treated akin to "‘essential services" and be allowed to function at par with the steel and cement sectors.

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