India’s auto production dropped by 18.14pc to 1,646,332 units in February from a year ago. India’s auto association SIAM has warned that the COVID-19 outbreak is likely to critically impact automobile production in India, going forward, in the wake of delayed auto parts shipments from China. Most automobile companies in India import close to 10-30pc raw material from China, including auto parts.
Vehicle production
In February, Indian auto industry produced a total of 1,646,332 vehicles units, which is down by 18.14pc from 2,034,597 units produced a year ago, according to data released by Society of Indian Automobile Manufacturers (SIAM). The production figures include cars, commercial vehicles, three-wheelers, two-wheelers and quadricycles.
| India auto sales in February | |||
| 2020 | 2019 | Pc Change | |
| Passenger | 251516 | 272243 | -7.61 |
| Commercial | 58,670.00 | 87,436.00 | -32.90 |
| Three-wheelers | 41,300.00 | 59,875.00 | -31.02 |
| Two-wheelers | 12,94,791.00 | 16,14,941 | -19.82 |
Production and sales of automobiles in India declined due to a slowdown in the economic slowdown and a reduction in the production of BSIV vehicles, according to SIAM. India is upgrading its vehicular emission standard to BSVI from April 1, 2020 onwards, this has led to a phasing out of BSIV (earlier emission standard) vehicles. SIAM has cited a slight improvement in last moment sales as buyers tried to advance purchase BS-IV vehicles that are offered at high discounts.
Following the adoption of BSVI standards, auto industry is expecting a sales boost from the implementation of a draft scrappage policy, which incentivises scrapping old vehicles for cash or discounts on new purchases.
COVID-19 impact
Auto makers were thus far insulated from the impact of auto component supply chain disruption in China as they had stocked inventory in January 2020 ahead of the Chinese New Year. But given India’s shift to the new BSVI standards, many manufacturers will be constrained with absence of fresh parts supply from China. This disruption is expected to “critically hamper production” across all vehicle segments, said SIAM.
Although automakers are exploring various alternatives including localising production of parts, but regulatory test and scaling up production in a short notice is next to impossible in India. Earlier Indian car producers were mulling to airlift auto parts from Chinese ports.
Force majeure
India’s Ministry of Finance notified in mid-February that COVID-19 is a force majeure situation and supply disruptions caused by the virus can be dealt under that force majeure clause. This has given significant relief to the auto industry. Besides, government has also ensured round the clock clearance at all customs establishment to ease the supply chain bottlenecks faced by various domestic industries.