Learnings from lockdown helping automakers stay on track

Nandana James Mumbai | Updated on April 07, 2021

Limited nature of lockdowns, improved ability to manage supply chains and vaccination drive offer respite in second wave, say analysts

Automakers are implementing measures like increasing buffers in inventories, cutting costs of non-core exercises, digitisation and better management of production — which they have learnt over the past year of running business amid the pandemic — to mitigate the impact of the second wave of the pandemic.

The limited nature of the lockdowns and better ability to manage supply chains compared to last year, as well as the vaccination drives, are offering respite, company officials and analysts told BusinessLine. On Sunday, India became only the second country in the world, after the US, to record more than a lakh cases of Covid-19 in a single day at any time during the pandemic. Many states have put in place restrictions and lockdowns to curb the virus’ spread.

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While a strong resurgence of Covid-19 cases might negatively impact consumer sentiments, which will have an effect on buying — as car buying is a discretionary purchase — the limited nature of the lockdowns this time, better knowledge of the virus, as well as vaccination drives would serve to mitigate the impact, Shashank Srivastava, Executive Director (Marketing & Sales), Maruti Suzuki India, told BusinessLine.

“As a result, the situation may be manageable but with a lot of careful implementation of the processes learnt. At Maruti Suzuki, we are preparing for the new Covid-19 wave with a very stringent implementation of our SOPs in our dealer showrooms and workshops. We have also, last year, strengthened our digital platform...We also have digitised the end-to-end financing requirement of the customer. This is an industry-first and should help in continuing the retails smoothly as 80 per cent of car sales is through financing,” Srivastava explained.

“At this stage, there is no impact on our operations,” said Ravindra Kumar GP, CHRO, Tata Motors. Industries have been allowed to operate and employees are able to commute to the company’s plants without hindrance by following necessary Covid-19 protocol, Kumar pointed out.

Auto companies have put a number of measures in place to continue their production operations, taking lessons from last year’s lockdowns. “They have realigned their incoming and outgoing logistics, increasing buffers in inventories of parts as well as finished goods, and have cut costs for some non-core exercises. Few OEMs globally have been more proactive in re-strategising and have remodelled their operations both at the production and sales sides to adapt in the uncertain environment,” said Suraj Ghosh, Associate Director — South Asia Powertrain Forecasts, IHS Markit.

“In terms of production, our immediate focus is to fasten and streamline the demand and supply processes with more accuracy and manage production, along with faster deliveries making it easier and convenient for customers by reducing the delivery time,” said Naveen Soni, Sr. Vice President, Toyota Kirloskar Motor.

Also read: Suzuki Motor Gujarat starts third plant with 2.5-lakh-units capacity

Readiness in terms of ability to manage supply chains is much better during the second wave than the first one, Hetal Gandhi, Director, Crisil Research, pointed out. “Automobile manufacturers, for instance, even during the first wave had adapted to accommodation of workers staying within the factory premises and continuing production levels.”

However, the automobile sector continues to be cautious. While 2021 started on an optimistic note, the second wave of the pandemic casts a shadow on recovery speed in the coming months, noted Yadvinder Singh Guleria, Director – Sales & Marketing, Honda Motorcycle & Scooter India. “Honda is closely monitoring the situation on the ground to assess the impact and based on our learnings from the year gone by, we shall be taking appropriate measures,” he said.

Besides, though lockdowns currently imposed are of shorter duration and may not halt activities at the retail level, Maharashtra — which has a lockdown in place — accounts for 8-9 per cent of two-wheeler and 9-10 per cent of passenger vehicle sales, Gandhi pointed out. This runs a risk of a moderate impact in volumes with sentiments being impacted, she cautioned.

Published on April 07, 2021

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