The Covid-19 pandemic has deeply pained the global economy as well as diverse industries especially the automotive sector. This is largely because of the disruption of the automotive supply chain and manufacturing in China. Exports of Chinese parts, interruptions of large scale manufacturing across Europe, and the closure of assembly plants in the United States have deeply hurt the sector globally.
In India, the onset of Covid-19 will have a vast pessimistic impact on the automotive industry. It is said that the sector is expecting a loss of 7.5 lakh units in production and US$2 billion in revenue in March alone due to the nationwide lockdown to combat the outbreak. Largest carmaker in the country Maruti Suzuki India has been witnessing a decline in sales for the past six months and reported a 33.5 percent plunge in total sales to 1,09,264 units in July 2019. Maruti, which has around 50 percent share of India’s passenger car market, sold 1.56 million vehicles during the year ended March 31, against 1.86 million in the previous year.
The automaker sold 83,792 units in March, compared with 158,076 units during the same period last year. However, the numbers are declined compared to last year’s sales and this is largely due to suspension of operations from March 22 in the wake of a government order of nationwide lockdowns.
According to the Society of Indian Automobile Manufacturers, plant closures by automakers and auto part manufacturers are expected to lead to a daily revenue loss of over US$305 million.
Impact Across the World
New car registrations in the UK has seen a decline of 44 percent in March, which is a steeper drop than during the 2008 recession, and the worst since 1999. The condition is similar across Europe as new car sales fell 85 percent in Italy, 72 percent in France, and 69 percent in Spain.
In the US, new vehicle sales leaned in March as the coronavirus pandemic milled consumer confidence and shuttered dealerships across the country. Even sales are likely to take a further dip in April as social distancing guidelines remain in place. Considering data from Cox Automotive, new car sales in the US weakened roughly 35 percent, and new vehicle sales fell 55 percent on March 27.
Moreover, as TrueCar, an automotive pricing and information company, has forecast a sales drop for March of 37 percent, Lyman said it could also be off in April between 50 percent to 60 percent.
Expectations to Bounce Back
As the government last week imposed a 21-day lockdown across India, it forces major automakers such as Maruti, Mahindra & Mahindra, Ford Motor Co, Toyota Motor Corp and Hyundai Motor Co. to shelve their manufacturing. This has caused a decline in two-wheelers demand (as India is the largest-market of two-wheelers). Despite this, the industry leaders are expecting to bounce back once the pandemic passes.
Commercial vehicles are expected to show some resilience, although this is reliant on the government continuing to invest in large infrastructure projects and the liquidity available with the transportation sector. It is also estimated that the Chinese supply chain would adapt quickly as the country is coming back on track.