For The First Time, Zero Vehicle Sales Recorded In April Due To COVID 19 Lockdown

For the first time in its history, Indian automobile industry will be posting almost zero sales in April. The historic event comes as the factories and dealerships across the nation are shut due to the Coronavirus induced lockdown.

While the lockdown can be blamed for the present slump in sales, things are not likely to improve in the coming months as well. Industry experts believe that the sales will be down due to the irregularities in the supply chain as well as the shut automobile ecosystem in the country.

And this might bring in a new trend in the automobile industry - that of lean manufacturing and inventory.

The problem at large

Citing industry experts, an Economic Times report explains that the top sourcing bases of automobile manufacturers like Pune (Maharashtra), Manesar (Gurgaon) and Chennai (Tamil Nadu) have been hit hard by the ongoing COVID 19 pandemic and are not likely to end the lockdown anytime soon.

The same stands true for the parts suppliers, which are mostly based in states like Tamil Nadu, Telangana, Karnataka, Maharashtra and Uttar Pradesh. Without these operating as before, the rest of the manufacturing process cannot be resumed to its potential.

(Representative Image: BCCL)

The problem of negligent sales, however, is not limited to the pause in production processes. In a recent directive, the government has allowed auto OEMs to start their factories outside Covid-19 hotspots since last week. But automakers are reluctant to do so.

A simple reason is, the inventory which usually lasts for 6 to 7 business days, will be shelved for longer considering the subsequent sales channels are shut. The ecosystem of suppliers, dealers and financiers also needs to be open for business for the inventory to be in rotation. If not, it incurs an added storage expense for the makers.

The impact

Automobile sector in India employs more than 40 million people directly or indirectly. At its scale, it contributes over 8% to the country¡¯s GDP and 15% to the government¡¯s tax collection.

So it is easy to see the industry having its effect on the national economy till the time things resume at some capacity. Industry experts, however, do not expect this anytime soon and going forward, are meaning to adopt a new strategy for business.

Only way out

As per TVS Motors chairman Venu Srinivasan, the auto industry in India needs to follow the Japanese way of just-in-time manufacturing. This would mean keeping a lean (or minimum) inventory at any given time and only produce in proportion to the sales, as and when they resume.

(Representative Image: BCCL)

In addition, the industry will need to source more of its components locally. "What we need to do is to give tremendous thrust to local content and ensure that our suppliers are present within a radius of 20 kilometres,¡± Srinivasan said. ¡°This will mitigate any potential supply chain disruption.¡±

Safety, it seems, is the foundation for the way the automobile business will resume in the post COVID 19 era. As and when they do, we can expect a more streamlined business model in the automobile industry.