Not only Apple, this wave of the epidemic has made India’s auto manufacturing industry also “down” a lot

Not only the cell phone supply chain, the global automobile manufacturing industry is also stuck in India.

Previously, an article on the epidemic in India caused Apple’s production capacity to be blocked, roughly analyzing the current plight of the cell phone industry chain in India, and after this article, “This wave of the Indian epidemic pit, Apple and Foxconn trapped”, we see another wave of peril for the global auto manufacturing industry in India. To be honest, this big pit has not only pitted Indian auto companies such as Tata, but also major manufacturers including Toyota, Suzuki, Hyundai and Chrysler have suffered.

In the face of the chip shortage and the continuous blow to the Indian supply chain, the global auto manufacturing industry to rethink whether this new continent of South Asian manufacturing will have the next round of big pit?

Indian manufacturing “choke” global auto makers

During the second wave of the new pneumonia outbreak in India, the local market saw a sharp double-digit decline in automotive (production and sales) as several leading automotive plants suspended operations (diverting industrial oxygen for medical purposes) and some state governments implemented local closure orders in early May.

With most auto retail stores closed and auto manufacturers’ production limited, the industry estimates that passenger car manufacturers shipped only 103,000 units overall in May, about one-third of the April 2021 shipments (286,728 units). It’s important to mention here that Indian automakers primarily report factory shipments, not actual retail sales figures on the user side.

Not only Apple, this wave of the epidemic has made India's auto manufacturing industry also "down" a lot

India’s largest automaker, Maruti Suzuki, shipped 32,903 units in April, more than double the 13,702 units shipped in the same month in 2020, and its shipments that month accounted for nearly a quarter of the overall market (135,879 units) for the month of April. However, sales were dismal throughout May, “In May 2021, the company was shut down from May 1 to May 16 to transfer oxygen (for medical use) that was intended for industrial use. in May 2020, the company suffered a production suspension triggered by the embargo. Since normal production did not take place for nearly two months, shipments in May 2021 are not comparable to May 2020,” said an official statement from Maruti Suzuki.

Maruti Suzuki’s Korean rival Hyundai Motor (India) is also in a bad position, although shipments in April nearly tripled year-on-year to 25,001 units, they have halved year-on-year (March) and are expected to be even worse in May.

The worst of all, Toyota Kirloskar Motor (India), which sold only 707 vehicles in May, had announced a maintenance shutdown of its production line equipment at the end of April. Naveen Soni, senior vice president of Toyota Kirloskar, told local media: “Our plant in Bidadi (Karnataka, India) did not start at all in May and sales were poor due to restrictions on going out and blockades taken in different parts of India. Therefore, comparing May’s performance with May 2020 shipments would be highly skewed, as operations and sales restarts have just started after the first wave of the outbreak by our manager in May 2020.”

Meanwhile, domestic shipments of India’s homegrown auto majors Tata and Mahindra (Mahindra & Mahindra) also fell 40% (to 15,181 units) and 56% (to 8,004 units), respectively, sequentially.

However, Suni also said that the overall market situation and consumer sentiment in the near term now looks better than it did in May 2020. “We expect that once the epidemic is under control and the market reopens, factors such as ‘pent-up demand’ and individual travel demand will continue to become important as consumers are looking to own their own vehicles rather than use shared or public transport options anymore. The proof of that is that we have a very good number of orders right now and we’re not seeing a lot of cancellations on those orders. So once the restrictions are relaxed, we will be able to better assess sales”, said Suni.

Similar to Suni’s optimism are those manufacturing companies that produce trucks and transport vehicles. In the commercial vehicle segment, Tata Motors sold 9,371 units in May, up nearly sixfold from 1,266 units a year earlier. Tata’s commercial vehicle shipments, however, fell by more than a third to 14,435 units in April 2021 from a year earlier. Private Indian commercial vehicle manufacturer Ashok Leyland shipped 1,277 units in May 2020, doubling to 2,738 units last month. On closer inspection, however, period shipments were down 66% YoY (April). VE Commercial Vehicles India sold 704 units in the Indian market last month compared to 455 units in the same period last year, which is a small increase.

Apparently, the first to start gaining after the end of the epidemic may not be the family cars, but the two-wheeled motorcycles that are the most convenient to travel through the streets.

In the two-wheeler segment, Pune’s Bajaj Auto reported a 54 percent increase in shipments to 60,342 units in May, while another motorcycle manufacturer, TVS Auto, sold 52,084 two-wheelers in May 2021, compared to 41,067 in May 2020.

India’s auto supply chain will not recover in the near future

Although some Indian media reports suggest that the number of new cases per day has declined in recent times, with the number of confirmed cases falling to around 200,000, the specifics are still difficult to ascertain.

Some analysts say that the recent dramatic decrease in the number of confirmed cases in India could be due to the return of a large number of rural workers from the cities (as many cities have been closed), who have temporarily returned to the countryside to escape the epidemic. However, it is not possible to count the number of confirmed cases of this group in the rural areas, and the possibility of returning to work in the future is not known.

In other words, the resumption of work for the major Indian auto manufacturers is still not promising.

A Daimler India spokeswoman told the media on Tuesday that Daimler’s Indian plants have been closed and its bus and truck manufacturing divisions have been out of service for more than three days due to a nationwide closure restriction that has led to a shortage of employees and parts. “Daimler India Commercial Vehicles (DICV) announced the shutdown from June 1 to June 3 due to the closure triggering logistical and employee work restrictions and a temporary parts shortage,” a Daimler spokesman said in a statement.

The company is the first major plant near the automobile manufacturing center in Chennai, India, to order a temporary shutdown due to a shortage of parts. In fact, the biggest problem is not the shortage of parts, but due to worker protests over their own safety issues, this auto industry belt of Ford Motor Company, Hyundai Motor Company and Renault-Nissan and other global auto majors, have ordered the closure of production plants last week.

A third-party survey released on Tuesday showed a significant slowdown and stagnation in the start-up rate of car manufacturing plants in India in May due to an increase in cases caused by the new crown pneumonia outbreak, which severely limited new orders and production capacity, as well as a scarcity of raw materials that pushed up production costs.

Local industry sources also pointed out that not only will there be a threat of a third wave of the epidemic in this situation, but local manufacturing companies will also face the possibility of a resurgence of the epidemic in their plants even if they resume work.

In this regard, the car manufacturing majors are obviously also planning for a rainy day. A Daimler India spokesman said the company is supporting employees’ “rest” through its health program, adding that the company will pay full wages to employees during non-production periods to protect their earnings.

DICV India, a subsidiary of Germany’s Daimler Group, manufactures and sells trucks, large buses and Mercedes-Benz coaches in India. The company’s plant near Chennai also produces complete vehicles for Daimler truck brands such as Fuso, Mercedes-Benz and Freightliner, and exports its products to more than 60 markets worldwide. But with this round of outbreaks, it is not known how long the “shutdown” of the plant will last, and the impact on its global production and sales in the coming months cannot be predicted.

Hyundai Motor India (HMIL) reported on Tuesday that the company shipped 30,703 units in May, down 48 percent from 59,203 units in April, due to various restrictions in Indian states that affected shipments to dealers as a result of the new crown epidemic. With total shipments in May last year (within India) of 25,001 units compared to 49,002 units in April, also down 49 percent, the impact of the two rounds of the epidemic is evident. In a statement, the company said that in addition to the local market woes, exports also hit a snag: the company exported 5,702 units in May, down 44 percent from 10,201 in April.

Intriguingly, compared to the “pessimism” of these international auto majors, some local Indian auto companies are beginning to show their optimism.

India’s leading car company Mahindra (Mahindra & Mahindra), head of the automotive sector Naqara said in an interview with local media on Thursday that the company’s entire product portfolio will show strong growth momentum in the next six months, due to the significant improvement in the epidemic. “We expect demand to rebound strongly as cases decrease and the market gradually opens up. We are working closely with our supplier partners to manage supply chain issues and meet market demand,” added Nacala. for its part, Mahindra & Mahindra said it may take a year for the boom in the Indian auto market to return to its pre-epidemic levels after the second round of the outbreak led to the successive closure of auto plants and showrooms and 4S stores. It may take a year for the Indian auto market to return to its pre-epidemic level. But in the manufacturers’ view, the recent demand for cars from the public will be rapidly released due to the epidemic’s easing.

A spokesman from Nissan India expressed cautious optimism, saying in an interview with local media that the resumption of the plant will be carried out in an orderly manner under the supervision of all parties in the near future. “The company’s management and union representatives have signed a charter of ‘improvement’ measures to improve the health and safety of employees. The local court will begin approving the matter on June 5,” said a Nissan spokesman, who did not elaborate on the agreed comprehensive return to work improvements or the specific date.

The spokesman stressed, however, that Nissan will put the health and safety of its employees at the heart of its return to work operations and will take a number of measures to ensure their safety. It is reported that the plant has been gradually resuming production in phases since early June to ensure compliance with all safety and social distance codes. “We will continue to closely monitor the development of the outbreak and will continue to take all necessary measures to ensure safety and social distances and return to full production as soon as possible,” a Nissan spokesperson stressed.

New energy car players start “betting” on India?

Although the traditional car manufacturers in India a woe, but in the field of new energy vehicles, an important player has recently been suddenly burst to bet on the Indian manufacturing industry, it is Tesla.

This Thursday, according to local Indian media, citing a source familiar with the matter, Tesla Inc. has begun hiring for leadership and senior positions in India, the world’s largest pure electric car company is ready to enter India, the world’s largest emerging automotive market.

California-based Tesla is hiring for key positions including sales and marketing executives and human resources directors, according to the source, who asked not to be named. The local Tesla fan club also tweeted a week ago that Tesla had hired a senior legal adviser.

This information seems to give Indian media a psychological relief after months of speculation about Tesla’s big boss Musk. Because almost all Indian media believe that Tesla will enter India in January this year.

On Jan. 13 of this year, Musk tweeted “as promised” in response to a report that Tesla was in major talks with several Indian states about opening offices, showrooms and R&D centers – and possibly a factory.

Musk’s response at the time was somewhat ambiguous, but the local media continued to relish the possibility. Some media outlets also reported in detail that Tesla’s first factory in India would be located in Karnataka, and also said Musk said he was in talks with several Indian states to open a company office and R&D center. At the end of April, Indian media reported that Prashanth Menon, an Indian executive who had worked at Tesla for nearly four years, was promoted to CEO of India, indicating that Tesla’s entry into India is imminent.

But there is also media analysis that Tesla is still waiting for the Indian government’s production-related incentive programs, especially whether there are further incentives for electric car makers, before it can really enter the Indian market.

In fact, this manufacturing incentive has been increasing every year in order to attract the world’s best-known brands to manufacture their products in India and export them around the world. As recently as April, the Indian government approved a Rs. 181 billion (about $2.5 billion) program that includes increasing battery storage capacity to 50 billion watt hours.

But even with all this “meat and potatoes” attraction, Tesla’s entry into India is still very challenging. Local industry analysts in India say that unlike the Chinese market, India has not yet introduced incentives for electric vehicles. Currently, Tesla is dominating the trend of high-end electric car sales in China with the establishment of its first super factory outside the U.S. in Shanghai. In addition, electric cars account for about 6 percent of total annual vehicle sales in China, while in India that figure is even less than 1 percent.

So at the same time, the high price of Tesla cars is seen as a difficult fit for the Indian market, where despite the growth of the middle and upper income groups, the vast majority of people still can’t afford to buy a regular car, let alone an expensive all-electric car brand. In addition, the lack of infrastructure such as charging pads is another obstacle to the mass adoption of electric vehicles in India.

Tesla has not yet issued a response to media reports that it has chosen Karnataka as the site for its first factory. Other sources familiar with the matter told the media that the electric car maker has been in talks with local officials in Karnataka for six months and is actively considering setting up a production line to assemble its entry-level electric cars on the outskirts of Bangalore.

Local industry analysts in India are not optimistic about Tesla’s landing, “The success of electric cars depends not only on infrastructure such as charging posts (stations), but also on understanding the importance of electricity supply to a country, and there is no guarantee that states will charge the same rate per unit for charging electric cars. We will all look like big fools when states start charging Rs 100/unit for EVs!”

Some analysts also point out that the electric car maker may not make better economic sense if it builds a local production plant, as the world’s traditional auto majors have already started ramping up their electric models. “If all the world’s established automakers move to making electric cars, in what ways will Tesla compete with the now powerful traditional automakers? What would the cost advantage of Made in India bring to the table? And what are its unique resources?”

Some local netizens even mocked Tesla’s entry into the Indian market, “Let’s not talk about when the epidemic will subside, let’s say Tesla does build a factory in India and put it into production, but it’s a daunting task to find gasoline filling stations on the highways in many states …… Many people will even find themselves struggling to charge their mobile devices …… especially in rural areas, where users crying out in the middle of the night on desolate highways should be the only option if you find your car’s range is about to shut down. India is fraught with uncertainty and the infrastructure remains poor and unsuitable for electric vehicle companies.”

Clearly, India’s auto industry is entering its worst-ever slowdown and slump, and despite news that the New Crown pneumonia epidemic is receding, resuming production remains a mystery for the manufacturing sector as a whole. In such a situation, traditional OEMs are languishing in hesitation and wandering, and how likely is it that new energy vehicles, especially big manufacturers like Tesla, will land their production lines in India?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/not-only-apple-this-wave-of-the-epidemic-has-made-indias-auto-manufacturing-industry-also-down-a-lot/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2021-06-05 07:31
Next 2021-06-05 07:37

Related articles